Question 1

An increase in the interest rate will cause

Accepted Answer

A)  planned investment spending to increase. 
B)  planned investment spending to decrease. 
C)  the investment function to shift out. 
D)  the investment function to shift in. 
A)  planned investment spending to increase. 
B)  planned investment spending to decrease. 
C)  the investment function to shift out. 
D)  the investment function to shift in. B

Question 2

If the marginal propensity to consume (MPC) is 0.75 and government purchases increase by $200 billion, then

Accepted Answer

A)  equilibrium real Gross Domestic Product (GDP) will increase by $800 billion. 
B)  equilibrium real Gross Domestic Product (GDP) will increase by $200 billion. 
C)  equilibrium real Gross Domestic Product (GDP) will increase by $50 billion. 
D)  the effect on equilibrium real Gross Domestic Product (GDP) cannot be determined from the given information. 
A)  equilibrium real Gross Domestic Product (GDP) will increase by $800 billion. 
B)  equilibrium real Gross Domestic Product (GDP) will increase by $200 billion. 
C)  equilibrium real Gross Domestic Product (GDP) will increase by $50 billion. 
D)  the effect on equilibrium real Gross Domestic Product (GDP) cannot be determined from the given information. A

Question 3

The break-even point refers to

Accepted Answer

A)  the amount of autonomous consumption. 
B)  the point at which planned real consumption equals real disposable income. 
C)  the maximum amount of dissaving a person can experience. 
D)  a point at which planned real consumption is for greater than real disposable income. 
A)  the amount of autonomous consumption. 
B)  the point at which planned real consumption equals real disposable income. 
C)  the maximum amount of dissaving a person can experience. 
D)  a point at which planned real consumption is for greater than real disposable income. B

Question 4

All of the following would cause the investment function relating investment to the interest rate to shift EXCEPT

Accepted Answer

A)  a change in the real interest rate. 
B)  a change in producer expectations of future profit. 
C)  a change in planned capital goods expenditure. 
D)  a change in productive technology. 
A)  a change in the real interest rate. 
B)  a change in producer expectations of future profit. 
C)  a change in planned capital goods expenditure. 
D)  a change in productive technology.

Question 5

Which of the following is NOT included in the flow of investment spending that is part of total planned expenditures in the economy?

Accepted Answer

A)  Purchases of corporate stock 
B)  Spending on capital goods 
C)  Inventory investment 
D)  Fixed investment 
A)  Purchases of corporate stock 
B)  Spending on capital goods 
C)  Inventory investment 
D)  Fixed investment

Question 6

-In the above table, the average propensity to save when disposable income is $5,000 is

Accepted Answer

A)  0.2. 
B)  0.1. 
C)  0.0. 
D)  -0.1. 
A)  0.2. 
B)  0.1. 
C)  0.0. 
D)  -0.1.

Question 7

The 45-degree reference line indicates all points at which

Accepted Answer

A)  planned real consumption expenditures and planned real saving are equal. 
B)  planned real saving and planned real investment are equal. 
C)  planned real consumption expenditures and real GDP are equal. 
D)  planned real saving and planned real saving are equal. 
A)  planned real consumption expenditures and planned real saving are equal. 
B)  planned real saving and planned real investment are equal. 
C)  planned real consumption expenditures and real GDP are equal. 
D)  planned real saving and planned real saving are equal.

Question 8

Because a decrease in real autonomous spending results in a ________ in the price level, the ultimate effect on real GDP is ________ that predicted by the multiplier.

Accepted Answer

A)  fall; smaller 
B)  fall; larger 
C)  rise; smaller 
D)  fall, smaller 
A)  fall; smaller 
B)  fall; larger 
C)  rise; smaller 
D)  fall, smaller

Question 9

Which of the following is a true statement?

Accepted Answer

A)  The C + I + G + X curve has no relationship to the aggregate demand curve other than some of the variables that affect one curve also affect the other. 
B)  The C + I + G + X curve is used to derive the aggregate demand curve, but the C + I + G + X curve is drawn for one price level while price levels vary along the aggregate demand curve. 
C)  The C + I + G + X curve is used to derive the aggregate demand curve, but the aggregate demand curve is drawn for one price level. 
D)  Both the C + I + G + X curve and the aggregate demand curve are drawn for one price level. 
A)  The C + I + G + X curve has no relationship to the aggregate demand curve other than some of the variables that affect one curve also affect the other. 
B)  The C + I + G + X curve is used to derive the aggregate demand curve, but the C + I + G + X curve is drawn for one price level while price levels vary along the aggregate demand curve. 
C)  The C + I + G + X curve is used to derive the aggregate demand curve, but the aggregate demand curve is drawn for one price level. 
D)  Both the C + I + G + X curve and the aggregate demand curve are drawn for one price level.

Question 10

Of the relationships below, which is the least stable?

Accepted Answer

A)  Consumption 
B)  Saving 
C)  Investment 
D)  Net exports 
A)  Consumption 
B)  Saving 
C)  Investment 
D)  Net exports

Question 11

The slope of the consumption function is the

Accepted Answer

A)  MPC. 
B)  APC. 
C)  APS. 
D)  MPS. 
A)  MPC. 
B)  APC. 
C)  APS. 
D)  MPS.

Question 12

-According to the above table, the value of MPS is ________.

Accepted Answer

A)  0.9 
B)  0.2 
C)  0.1 
D)  increasing as real disposable income rises. 
A)  0.9 
B)  0.2 
C)  0.1 
D)  increasing as real disposable income rises.

Question 13

Which one of the following statements is true?

Accepted Answer

A)  The investment function is positively sloped to reflect the fact that higher interest rates cause more people to invest their funds. 
B)  The investment function is positively sloped to reflect the fact that lower interest rates cause more firms to expand their operations. 
C)  Along a given investment function, higher interest rates result in more investment projects being undertaken. 
D)  Along a given investment function, higher interest rates result in fewer investment projects being undertaken. 
A)  The investment function is positively sloped to reflect the fact that higher interest rates cause more people to invest their funds. 
B)  The investment function is positively sloped to reflect the fact that lower interest rates cause more firms to expand their operations. 
C)  Along a given investment function, higher interest rates result in more investment projects being undertaken. 
D)  Along a given investment function, higher interest rates result in fewer investment projects being undertaken.

Question 14

Saving is

Accepted Answer

A)  the amount one does not consume in a given period of time while savings is the accumulation of past periods of saving. 
B)  the accumulation of past periods of savings while savings is the amount of disposable income that is not consumed in a given period of time. 
C)  the difference between real GDP and disposable income while savings is the difference between disposable income and consumption spending. 
D)  the difference between disposable income and spending on goods and services while savings is the difference between real GDP and disposable income. 
A)  the amount one does not consume in a given period of time while savings is the accumulation of past periods of saving. 
B)  the accumulation of past periods of savings while savings is the amount of disposable income that is not consumed in a given period of time. 
C)  the difference between real GDP and disposable income while savings is the difference between disposable income and consumption spending. 
D)  the difference between disposable income and spending on goods and services while savings is the difference between real GDP and disposable income.

Question 15

The investment schedule is downward sloping and the saving schedule is upward sloping with respect to the interest rate. Suppose the equilibrium real investment per year at the market rate of interest is $1 trillion. How is this represented when real national income per year is on the horizontal axis? How is this incorporated into the consumption-function graph?

Accepted Answer

Investment spending is a function of the

Question 16

-Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. What does planned real saving equal when real disposable income equals $6,000?

Accepted Answer

A)  -3,000 
B)  -1,200 
C)  0 
D)  7,200 
A)  -3,000 
B)  -1,200 
C)  0 
D)  7,200

Question 17

The equation   is the

Accepted Answer

A)  average propensity to consume. 
B)  average propensity to save. 
C)  marginal propensity to consume. 
D)  marginal propensity to save. 
A)  average propensity to consume. 
B)  average propensity to save. 
C)  marginal propensity to consume. 
D)  marginal propensity to save.

Question 18

An increase in planned real investment spending causes

Accepted Answer

A)  a movement along the C + I + G + X curve and a shift of the aggregate demand curve. 
B)  a shift of the C + I + G + X curve and a movement along the aggregate demand curve. 
C)  a shift of the C + I + G + X curve but has no effect on the aggregate demand curve. 
D)  a shift of the C + I + G + X curve that causes the aggregate demand curve to shift. 
A)  a movement along the C + I + G + X curve and a shift of the aggregate demand curve. 
B)  a shift of the C + I + G + X curve and a movement along the aggregate demand curve. 
C)  a shift of the C + I + G + X curve but has no effect on the aggregate demand curve. 
D)  a shift of the C + I + G + X curve that causes the aggregate demand curve to shift.

Question 19

The equation   is the

Accepted Answer

A)  average propensity to consume. 
B)  average propensity to save. 
C)  marginal propensity to consume. 
D)  marginal propensity to save. 
A)  average propensity to consume. 
B)  average propensity to save. 
C)  marginal propensity to consume. 
D)  marginal propensity to save.

Question 20

-In the above figure, what is autonomous consumption?

Accepted Answer

A)  $0.0 trillion 
B)  $1.0 trillion 
C)  $2.0 trillion 
D)  $3.0 trillion 
A)  $0.0 trillion 
B)  $1.0 trillion 
C)  $2.0 trillion 
D)  $3.0 trillion

Exam 12: Consumption, Real GDP, and the Multiplier

An increase in the interest rate will cause

If the marginal propensity to consume (MPC) is 0.75 and government purchases increase by $200 billion, then

The break-even point refers to

All of the following would cause the investment function relating investment to the interest rate to shift EXCEPT

Which of the following is NOT included in the flow of investment spending that is part of total planned expenditures in the economy?

-In the above table, the average propensity to save when disposable income is $5,000 is

The 45-degree reference line indicates all points at which

Because a decrease in real autonomous spending results in a ________ in the price level, the ultimate effect on real GDP is ________ that predicted by the multiplier.

Which of the following is a true statement?

Of the relationships below, which is the least stable?

The slope of the consumption function is the

-According to the above table, the value of MPS is ________.

Which one of the following statements is true?

Saving is

-Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. What does planned real saving equal when real disposable income equals $6,000?

The equation is the

An increase in planned real investment spending causes

The equation is the

-In the above figure, what is autonomous consumption?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Because a decrease in real autonomous spending results in a in the price level, the ultimate effect on real GDP is that predicted by the multiplier.