Question 1

As disposable income increases, consumption spending

Accepted Answer

A) increases by the same amount 
B) decreases by the same amount 
C) increases by less than the increase in disposable income 
D) decreases by less than the increase in disposable income 
E) does not change at all 
A) increases by the same amount 
B) decreases by the same amount 
C) increases by less than the increase in disposable income 
D) decreases by less than the increase in disposable income 
E) does not change at all

Question 2

A decrease in net wealth will

Accepted Answer

A) increase consumption and saving at each level of income 
B) increase saving and decrease consumption at each level of income 
C) decrease consumption and saving at each level of income 
D) increase consumption and decrease saving at each level of income 
E) have no effect on consumption, since consumption is a function of income 
A) increase consumption and saving at each level of income 
B) increase saving and decrease consumption at each level of income 
C) decrease consumption and saving at each level of income 
D) increase consumption and decrease saving at each level of income 
E) have no effect on consumption, since consumption is a function of income

Question 3

Exhibit 9-3  
-In Exhibit 9-3, the MPC is equal to

Accepted Answer

A) 0.25 
B) 0.33 
C) 0.67 
D) 0.75 
E) 1.33 
A) 0.25 
B) 0.33 
C) 0.67 
D) 0.75 
E) 1.33

Question 4

An increase in the value of the U.S. dollar in world markets, other things constant, would increase the demand for U.S. exports.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following would shift the consumption function downward?

Accepted Answer

A) a decrease in stock prices 
B) a lower interest rate 
C) a lower price level 
D) lower disposable income 
E) expectations of higher future prices 
A) a decrease in stock prices 
B) a lower interest rate 
C) a lower price level 
D) lower disposable income 
E) expectations of higher future prices

Question 6

Changes in the price level will not shift the consumption function.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following would tend to shift the investment function upward?

Accepted Answer

A) higher interest rates 
B) gloomy sales expectations 
C) a cut in corporate taxes that raises after-tax profits 
D) a decrease in the marginal propensity to consume 
E) an increase in aggregate income 
A) higher interest rates 
B) gloomy sales expectations 
C) a cut in corporate taxes that raises after-tax profits 
D) a decrease in the marginal propensity to consume 
E) an increase in aggregate income

Question 8

Induced consumption spending

Accepted Answer

A) represents consumption that is independent of income 
B) plus saving equals total consumption spending 
C) is positively related to disposable income 
D) is equal to autonomous consumption spending in equilibrium 
E) is the difference between autonomous consumption spending and disposable income 
A) represents consumption that is independent of income 
B) plus saving equals total consumption spending 
C) is positively related to disposable income 
D) is equal to autonomous consumption spending in equilibrium 
E) is the difference between autonomous consumption spending and disposable income

Question 9

If autonomous net taxes increase by $10 trillion and the marginal propensity to consume is 0.8, consumption initially will

Accepted Answer

A) increase by $50 trillion 
B) decrease by $10 trillion 
C) decrease by $8 trillion 
D) increase by $10 trillion 
E) decrease by $50 trillion 
A) increase by $50 trillion 
B) decrease by $10 trillion 
C) decrease by $8 trillion 
D) increase by $10 trillion 
E) decrease by $50 trillion

Question 10

When economists say investment is autonomous, they mean that investment is independent of the level of saving.

Accepted Answer

A) True 
 B)False

Question 11

If the interest rate increases, then there will be

Accepted Answer

A) a rightward movement along the autonomous investment function 
B) a leftward movement along the autonomous investment function 
C) an upward shift of the autonomous investment function 
D) a downward shift of the autonomous investment function 
E) no movement along or shift of the autonomous investment function 
A) a rightward movement along the autonomous investment function 
B) a leftward movement along the autonomous investment function 
C) an upward shift of the autonomous investment function 
D) a downward shift of the autonomous investment function 
E) no movement along or shift of the autonomous investment function

Question 12

An increase in incomes in other countries, other things equal, would cause U.S.

Accepted Answer

A) exports to decrease and imports to increase 
B) exports to increase and imports to increase 
C) imports to decrease and exports to decrease 
D) imports to increase and exports would remain unchanged 
E) imports to remain unchanged and exports to increase 
A) exports to decrease and imports to increase 
B) exports to increase and imports to increase 
C) imports to decrease and exports to decrease 
D) imports to increase and exports would remain unchanged 
E) imports to remain unchanged and exports to increase

Question 13

The life-cycle hypothesis suggests that

Accepted Answer

A) people tend to borrow more when they reach middle age 
B) people tend to draw down their savings the most when they are young 
C) people tend to pay off their debts and save more when they reach old age 
D) net saving over a person's lifetime is small 
E) rich nations will save a larger fraction of their income than poor nations 
A) people tend to borrow more when they reach middle age 
B) people tend to draw down their savings the most when they are young 
C) people tend to pay off their debts and save more when they reach old age 
D) net saving over a person's lifetime is small 
E) rich nations will save a larger fraction of their income than poor nations

Question 14

If the MPC < 1 and a household's disposable income increases by $2,000, the household's consumption will

Accepted Answer

A) increase by less than $2,000 
B) increase by $2,000 
C) decrease if the family was wealthy before the income change 
D) remain the same unless the change in income significantly affects the household's wealth 
E) remain the same 
A) increase by less than $2,000 
B) increase by $2,000 
C) decrease if the family was wealthy before the income change 
D) remain the same unless the change in income significantly affects the household's wealth 
E) remain the same

Question 15

Expectations that disposable income will increase in the future will

Accepted Answer

A) shift the current consumption function up 
B) shift the current consumption function down 
C) result in a movement upward along the current consumption function 
D) make the current consumption function flatter 
E) make the current consumption function steeper 
A) shift the current consumption function up 
B) shift the current consumption function down 
C) result in a movement upward along the current consumption function 
D) make the current consumption function flatter 
E) make the current consumption function steeper

Question 16

An increase in wealth will

Accepted Answer

A) shift the consumption function upward 
B) make the consumption function steeper 
C) cause a movement upward along the consumption function 
D) cause a movement downward along the consumption function 
E) make the consumption function flatter 
A) shift the consumption function upward 
B) make the consumption function steeper 
C) cause a movement upward along the consumption function 
D) cause a movement downward along the consumption function 
E) make the consumption function flatter

Question 17

If incomes in the United States increase, other things equal, then U.S.

Accepted Answer

A) imports increase and exports remain constant 
B) exports increase and imports decrease 
C) imports decrease and exports decrease 
D) imports remain constant and exports increase 
E) net exports remain constant 
A) imports increase and exports remain constant 
B) exports increase and imports decrease 
C) imports decrease and exports decrease 
D) imports remain constant and exports increase 
E) net exports remain constant

Question 18

The most important determinant of a household's consumption spending is

Accepted Answer

A) its disposable income 
B) its total wealth 
C) the number of persons in the household 
D) its net wealth 
E) the ratio of wage to nonwage income the household earns 
A) its disposable income 
B) its total wealth 
C) the number of persons in the household 
D) its net wealth 
E) the ratio of wage to nonwage income the household earns

Question 19

The slope of the consumption function shows how

Accepted Answer

A) consumption changes over time 
B) consumption changes as household size changes 
C) consumption changes as the price level changes 
D) income changes as the level of consumption changes 
E) consumption changes as the level of income changes 
A) consumption changes over time 
B) consumption changes as household size changes 
C) consumption changes as the price level changes 
D) income changes as the level of consumption changes 
E) consumption changes as the level of income changes

Question 20

Which of the following would not shift the consumption function?

Accepted Answer

A) a change in net wealth 
B) a change in interest rates 
C) a change in the price level 
D) a change in expectations 
E) a change in disposable income 
A) a change in net wealth 
B) a change in interest rates 
C) a change in the price level 
D) a change in expectations 
E) a change in disposable income

Exam 9: Aggregate Expenditure

As disposable income increases, consumption spending

A decrease in net wealth will

Exhibit 9-3 -In Exhibit 9-3, the MPC is equal to

An increase in the value of the U.S. dollar in world markets, other things constant, would increase the demand for U.S. exports.

Which of the following would shift the consumption function downward?

Changes in the price level will not shift the consumption function.

Which of the following would tend to shift the investment function upward?

Induced consumption spending

If autonomous net taxes increase by $10 trillion and the marginal propensity to consume is 0.8, consumption initially will

When economists say investment is autonomous, they mean that investment is independent of the level of saving.

If the interest rate increases, then there will be

An increase in incomes in other countries, other things equal, would cause U.S.

The life-cycle hypothesis suggests that

If the MPC < 1 and a household's disposable income increases by $2,000, the household's consumption will

Expectations that disposable income will increase in the future will

An increase in wealth will

If incomes in the United States increase, other things equal, then U.S.

The most important determinant of a household's consumption spending is

The slope of the consumption function shows how

Which of the following would not shift the consumption function?

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand Supply and Markets

Introduction to Macroeconomics

Tracking the Us Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

The Algebra of Income and Expenditure

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

The Algebra of Demand-Side Equilibrium

International Trade

International Finance

Economic Development

National Income Accounts

Understanding Graphs

Variable Net Exports

Variable Net Exports Revisited

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