Question 1

A decrease in the value of the U.S. dollar relative to other currencies will

Accepted Answer

A) shift the autonomous net export function upward 
B) shift the autonomous net export function downward 
C) cause a rightward movement along the autonomous net export function 
D) cause a leftward movement along the autonomous net export function 
E) show no movement along or shift of the autonomous net export function 
A) shift the autonomous net export function upward 
B) shift the autonomous net export function downward 
C) cause a rightward movement along the autonomous net export function 
D) cause a leftward movement along the autonomous net export function 
E) show no movement along or shift of the autonomous net export function

Question 2

Out of disposable income, households

Accepted Answer

A) consume and save 
B) consume and invest 
C) save and invest 
D) consume, save, and pay taxes 
E) consume, save, pay taxes, and make transfer payments 
A) consume and save 
B) consume and invest 
C) save and invest 
D) consume, save, and pay taxes 
E) consume, save, pay taxes, and make transfer payments

Question 3

If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion, then consumption spending will rise by

Accepted Answer

A) $ 6 billion 
B) $14 billion 
C) $20 billion 
D) $28 billion 
E) $67 billion 
A) $ 6 billion 
B) $14 billion 
C) $20 billion 
D) $28 billion 
E) $67 billion

Question 4

Mr. Green is considering four possible investment opportunities, each of which would cost him $5,000. He expects annual returns on these investments of $600, $500, $400, and $300. If the interest rate is 7 percent, how many of these opportunities should Mr. Green undertake?

Accepted Answer

A) one 
B) two 
C) three 
D) four 
E) none 
A) one 
B) two 
C) three 
D) four 
E) none

Question 5

Which of the following is not a component of aggregate expenditure?

Accepted Answer

A) consumption 
B) government spending 
C) saving 
D) purchases of new plant and equipment by firms 
E) intentional increases in business inventories 
A) consumption 
B) government spending 
C) saving 
D) purchases of new plant and equipment by firms 
E) intentional increases in business inventories

Question 6

An increase in the price level will

Accepted Answer

A) increase consumption because goods are more expensive 
B) make the consumption function steeper 
C) increase consumption because wages will increase 
D) decrease consumption because falling interest rates make it cheaper to borrow 
E) decrease consumption because the value of net wealth has decreased 
A) increase consumption because goods are more expensive 
B) make the consumption function steeper 
C) increase consumption because wages will increase 
D) decrease consumption because falling interest rates make it cheaper to borrow 
E) decrease consumption because the value of net wealth has decreased

Question 7

Exhibit 9-3  
-In Exhibit 9-3, when real disposable income is equal to $6 billion, saving is equal to

Accepted Answer

A) 0 
B) $1 billion 
C) $2 billion 
D) $3 billion 
E) $4 billion 
A) 0 
B) $1 billion 
C) $2 billion 
D) $3 billion 
E) $4 billion

Question 8

If a household's income rises from $46,000 to $46,700 and its consumption spending rises from $35,800 to $36,400, then its

Accepted Answer

A) marginal propensity to consume is 0.86 
B) marginal propensity to consume is 0.99 
C) marginal propensity to consume is 0.98 
D) marginal propensity to save is 0.01 
E) marginal propensity to save is 0.86 
A) marginal propensity to consume is 0.86 
B) marginal propensity to consume is 0.99 
C) marginal propensity to consume is 0.98 
D) marginal propensity to save is 0.01 
E) marginal propensity to save is 0.86

Question 9

Which of the following would not shift the consumption function downward?

Accepted Answer

A) a decline in business profits 
B) a decline in wealth 
C) an increase in the price level 
D) an increase in the interest rate 
E) a more pessimistic outlook about the future 
A) a decline in business profits 
B) a decline in wealth 
C) an increase in the price level 
D) an increase in the interest rate 
E) a more pessimistic outlook about the future

Question 10

The owners of the Morning Glory Coffee Shop are considering spending $3,000 on a new cappuccino machine. They expect to increase revenues by $200 per year if they do. The current interest rate is 8 percent. Which of the following is true?

Accepted Answer

A) The rate of return on their investment is $200. 
B) The rate of return on their investment is 5 percent. 
C) The owners should not buy the machine. 
D) The owners should buy the cappuccino machine if they have the $3,000 in cash, but not if they have to borrow the money. 
E) The owners should buy the cappuccino machine regardless of whether they have the $3,000 in cash or not. 
A) The rate of return on their investment is $200. 
B) The rate of return on their investment is 5 percent. 
C) The owners should not buy the machine. 
D) The owners should buy the cappuccino machine if they have the $3,000 in cash, but not if they have to borrow the money. 
E) The owners should buy the cappuccino machine regardless of whether they have the $3,000 in cash or not.

Question 11

The opportunity cost of investing in capital is the interest rate.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following would not shift the consumption function?

Accepted Answer

A) a change in household wealth 
B) a change in the price level 
C) a change in household disposable income 
D) a change in the level of unemployment 
E) a change in the rate of interest 
A) a change in household wealth 
B) a change in the price level 
C) a change in household disposable income 
D) a change in the level of unemployment 
E) a change in the rate of interest

Question 13

Fluctuations in investment

Accepted Answer

A) account for almost all of the variability in GDP during expansions 
B) account for almost all of the variability in GDP 
C) account for almost all of the variability in GDP during recessions 
D) are larger during expansions than during recessions 
E) account for more of the variability in GDP than consumption does 
A) account for almost all of the variability in GDP during expansions 
B) account for almost all of the variability in GDP 
C) account for almost all of the variability in GDP during recessions 
D) are larger during expansions than during recessions 
E) account for more of the variability in GDP than consumption does

Question 14

Consumption

Accepted Answer

A) makes up about two-thirds of GDP in a typical year 
B) exceeds GDP in years when net exports are negative 
C) is much more volatile than investment, especially during recession years 
D) is much more volatile than investment, especially during expansion years 
E) has declined as a fraction of GDP over time 
A) makes up about two-thirds of GDP in a typical year 
B) exceeds GDP in years when net exports are negative 
C) is much more volatile than investment, especially during recession years 
D) is much more volatile than investment, especially during expansion years 
E) has declined as a fraction of GDP over time

Question 15

Exhibit 9-1
  
-Given the data in Exhibit 9-1, the level of saving decreases as disposable income increases.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is the most volatile component of GDP?

Accepted Answer

A) investment (I) 
B) consumption (
C)  
C) saving (S) 
D) government purchases (G) 
E) net exports (X - M) 
A) investment (I) 
B) consumption (
C)  
C) saving (S) 
D) government purchases (G) 
E) net exports (X - M)

Question 17

A household's net wealth is the value of

Accepted Answer

A) its current income minus the value of all its liabilities 
B) all its assets minus their tax liabilities 
C) all its assets minus the value of all its liabilities 
D) all its assets minus its income 
E) its current income minus its tax liabilities 
A) its current income minus the value of all its liabilities 
B) all its assets minus their tax liabilities 
C) all its assets minus the value of all its liabilities 
D) all its assets minus its income 
E) its current income minus its tax liabilities

Question 18

Consumption spending depends mainly on the level of

Accepted Answer

A) national income 
B) disposable income 
C) personal income 
D) personal income taxes 
E) imports 
A) national income 
B) disposable income 
C) personal income 
D) personal income taxes 
E) imports

Question 19

Induced saving

Accepted Answer

A) is that part of saving that is inversely related to the interest rate 
B) plus autonomous saving equals disposable income 
C) is that portion of saving that is directly related to income 
D) is less than disposable income at every level of income 
E) equals autonomous saving at every income level 
A) is that part of saving that is inversely related to the interest rate 
B) plus autonomous saving equals disposable income 
C) is that portion of saving that is directly related to income 
D) is less than disposable income at every level of income 
E) equals autonomous saving at every income level

Question 20

Which of the following is not an example of a government purchase?

Accepted Answer

A) schools and teacher salaries 
B) Chinese toys to be sold in discount department stores 
C) aircraft carriers 
D) interstate highway construction 
E) All the answers are correct 
A) schools and teacher salaries 
B) Chinese toys to be sold in discount department stores 
C) aircraft carriers 
D) interstate highway construction 
E) All the answers are correct

Exam 9: Aggregate Expenditure

A decrease in the value of the U.S. dollar relative to other currencies will

Out of disposable income, households

If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion, then consumption spending will rise by

Mr. Green is considering four possible investment opportunities, each of which would cost him $5,000. He expects annual returns on these investments of $600, $500, $400, and $300. If the interest rate is 7 percent, how many of these opportunities should Mr. Green undertake?

Which of the following is not a component of aggregate expenditure?

An increase in the price level will

Exhibit 9-3 -In Exhibit 9-3, when real disposable income is equal to $6 billion, saving is equal to

If a household's income rises from $46,000 to $46,700 and its consumption spending rises from $35,800 to $36,400, then its

Which of the following would not shift the consumption function downward?

The owners of the Morning Glory Coffee Shop are considering spending $3,000 on a new cappuccino machine. They expect to increase revenues by $200 per year if they do. The current interest rate is 8 percent. Which of the following is true?

The opportunity cost of investing in capital is the interest rate.

Which of the following would not shift the consumption function?

Fluctuations in investment

Consumption

Exhibit 9-1 -Given the data in Exhibit 9-1, the level of saving decreases as disposable income increases.

Which of the following is the most volatile component of GDP?

A household's net wealth is the value of

Consumption spending depends mainly on the level of

Induced saving

Which of the following is not an example of a government purchase?

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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