Question 1

For a closed economy with no government, we know that at every level of GDP actual investment equals

Accepted Answer

A)  planned investment. 
B)  planned saving. 
C)  the difference between planned saving and actual saving. 
D)  the difference between planned investment and actual saving. 
A)  planned investment. 
B)  planned saving. 
C)  the difference between planned saving and actual saving. 
D)  the difference between planned investment and actual saving.

Question 2

In the Keynesian model, whenever planned saving exceeds planned investment,

Accepted Answer

A)  there will be unplanned inventory accumulation. 
B)  there will be unplanned inventory depletion. 
C)  real GDP will not be influenced. 
D)  the interest rate will remain unchanged. 
A)  there will be unplanned inventory accumulation. 
B)  there will be unplanned inventory depletion. 
C)  real GDP will not be influenced. 
D)  the interest rate will remain unchanged.

Question 3

The average propensity to save is

Accepted Answer

A)  real consumption/real disposable income. 
B)  real saving/real disposable income. 
C)  change in real consumption/change in real disposable income. 
D)  change in real saving/change in real disposable income. 
A)  real consumption/real disposable income. 
B)  real saving/real disposable income. 
C)  change in real consumption/change in real disposable income. 
D)  change in real saving/change in real disposable income.

Question 4

-Refer to the above figure. If real disposable income is $30,000, saving is

Accepted Answer

A)  $0. 
B)  $4000. 
C)  $5000. 
D)  $6000. 
A)  $0. 
B)  $4000. 
C)  $5000. 
D)  $6000.

Question 5

-In the above figure, at an income level of Y3 and planned expenditures of (C + I)1,

Accepted Answer

A)  planned saving exceeds planned investment. 
B)  the economy is in equilibrium. 
C)  the quantity of aggregate demand exceeds real Gross Domestic Product (GDP). 
D)  there is full employment. 
A)  planned saving exceeds planned investment. 
B)  the economy is in equilibrium. 
C)  the quantity of aggregate demand exceeds real Gross Domestic Product (GDP). 
D)  there is full employment.

Question 6

The relationship between real consumption spending and real disposable income

Accepted Answer

A)  is direct. 
B)  is inverse. 
C)  plots a vertical line. 
D)  plots a horizontal line. 
A)  is direct. 
B)  is inverse. 
C)  plots a vertical line. 
D)  plots a horizontal line.

Question 7

Consider a closed economy without a government and without international trade. What will be true when this economy is in equilibrium?

Accepted Answer

A)  Total planned real investment spending will exceed total planned real expenditures. 
B)  Planned real investment spending will exceed real planned saving. 
C)  Planned real consumption spending equals real GDP. 
D)  Planned real consumption spending plus planned real investment spending equals real GDP. 
A)  Total planned real investment spending will exceed total planned real expenditures. 
B)  Planned real investment spending will exceed real planned saving. 
C)  Planned real consumption spending equals real GDP. 
D)  Planned real consumption spending plus planned real investment spending equals real GDP.

Question 8

-Use the above table. At an income of $150,

Accepted Answer

A)  real saving is $20. 
B)  real dissaving is $10. 
C)  real saving is $10. 
D)  real dissaving is $50. 
A)  real saving is $20. 
B)  real dissaving is $10. 
C)  real saving is $10. 
D)  real dissaving is $50.

Question 9

-In the above figure, a change in autonomous consumption to 100 would cause the consumption function to

Accepted Answer

A)  become steeper. 
B)  become flatter. 
C)  shift down. 
D)  shift up. 
A)  become steeper. 
B)  become flatter. 
C)  shift down. 
D)  shift up.

Question 10

-Consider the above figure. At income level   = $30, the APC is equal to

Accepted Answer

A)  1.25. 
B)  1.67. 
C)  1.05. 
D)  0.05. 
A)  1.25. 
B)  1.67. 
C)  1.05. 
D)  0.05.

Question 11

The multiplier helps explain

Accepted Answer

A)  why a rise in government expenditures causes real Gross Domestic Product (GDP) to rise by more than the amount of the increase in government spending. 
B)  why an increase in disposable income causes real Gross Domestic Product (GDP) to rise by less than the amount of the increase in disposable income. 
C)  why a decrease in taxes causes real Gross Domestic Product (GDP) to fall by more than the amount of the decrease in taxes. 
D)  why a fall in investment cause real Gross Domestic Product (GDP) to rise by more than the amount of the decrease in investment. 
A)  why a rise in government expenditures causes real Gross Domestic Product (GDP) to rise by more than the amount of the increase in government spending. 
B)  why an increase in disposable income causes real Gross Domestic Product (GDP) to rise by less than the amount of the increase in disposable income. 
C)  why a decrease in taxes causes real Gross Domestic Product (GDP) to fall by more than the amount of the decrease in taxes. 
D)  why a fall in investment cause real Gross Domestic Product (GDP) to rise by more than the amount of the decrease in investment.

Question 12

Which of the following would NOT be considered a consumption good?

Accepted Answer

A)  A new sweater 
B)  Tools used to cut metal on an auto production line 
C)  A jar of Skippy peanut butter 
D)  A bottle of Scotch whiskey 
A)  A new sweater 
B)  Tools used to cut metal on an auto production line 
C)  A jar of Skippy peanut butter 
D)  A bottle of Scotch whiskey

Question 13

-Refer to the above figure. The figure represents the consumption function for a consumer. The distance between C and D represents

Accepted Answer

A)  the amount of autonomous consumption. 
B)  the amount of saving. 
C)  the amount of dissaving. 
D)  the point where saving equals zero. 
A)  the amount of autonomous consumption. 
B)  the amount of saving. 
C)  the amount of dissaving. 
D)  the point where saving equals zero.

Question 14

-Refer to the above figure. At an income of $10,000, saving is

Accepted Answer

A)  0. 
B)  $13,000. 
C)  $3,000. 
D)  -$3,000. 
A)  0. 
B)  $13,000. 
C)  $3,000. 
D)  -$3,000.

Question 15

How does a reduction in the price level affect the position of the C + I + G + X curve and in turn the equilibrium level of real GDP?

Accepted Answer

A)  The C + I + G + X curve shifts down, thereby reducing the equilibrium level of real GDP. 
B)  The C + I + G + X curve shifts down, thereby increasing the equilibrium level of real GDP. 
C)  The C + I + G + X curve shifts up, thereby reducing the equilibrium level of real GDP. 
D)  The C + I + G + X curve shifts up, thereby increasing the equilibrium level of real GDP. 
A)  The C + I + G + X curve shifts down, thereby reducing the equilibrium level of real GDP. 
B)  The C + I + G + X curve shifts down, thereby increasing the equilibrium level of real GDP. 
C)  The C + I + G + X curve shifts up, thereby reducing the equilibrium level of real GDP. 
D)  The C + I + G + X curve shifts up, thereby increasing the equilibrium level of real GDP.

Question 16

In a closed economy, equilibrium real Gross Domestic Product (GDP) occurs where

Accepted Answer

A)  the C + I + G line crosses the 45-degree line. 
B)  planned expenditures exceed national income. 
C)  saving exceeds planned investment. 
D)  all of these. 
A)  the C + I + G line crosses the 45-degree line. 
B)  planned expenditures exceed national income. 
C)  saving exceeds planned investment. 
D)  all of these.

Question 17

The larger is the marginal propensity to consume (MPC),

Accepted Answer

A)  the larger is the multiplier. 
B)  the smaller is the multiplier. 
C)  the smaller is the slope of the consumption function. 
D)  the larger is the slope of the saving function. 
A)  the larger is the multiplier. 
B)  the smaller is the multiplier. 
C)  the smaller is the slope of the consumption function. 
D)  the larger is the slope of the saving function.

Question 18

An increase in the marginal propensity to save (MPS)

Accepted Answer

A)  increases the value of the multiplier. 
B)  increases autonomous consumption. 
C)  increases the marginal propensity to consume (MP
C) . 
D)  none of the above. 
A)  increases the value of the multiplier. 
B)  increases autonomous consumption. 
C)  increases the marginal propensity to consume (MP
C) . 
D)  none of the above.

Question 19

Assuming that   = $20,000 and C = $22,000, we would find that the average propensity to consume would be equal to

Accepted Answer

A)  0.9. 
B)  1.1. 
C)  1.8. 
D)  0.8. 
A)  0.9. 
B)  1.1. 
C)  1.8. 
D)  0.8.

Question 20

What is the significance of the multiplier? What causes the multiplier to be larger or smaller?

Accepted Answer

The multiplier is important because it m

Exam 12: Consumption, Real GDP, and the Multiplier

For a closed economy with no government, we know that at every level of GDP actual investment equals

In the Keynesian model, whenever planned saving exceeds planned investment,

The average propensity to save is

-Refer to the above figure. If real disposable income is $30,000, saving is

-In the above figure, at an income level of Y3 and planned expenditures of (C + I)1,

The relationship between real consumption spending and real disposable income

Consider a closed economy without a government and without international trade. What will be true when this economy is in equilibrium?

-Use the above table. At an income of $150,

-In the above figure, a change in autonomous consumption to 100 would cause the consumption function to

-Consider the above figure. At income level = $30, the APC is equal to

The multiplier helps explain

Which of the following would NOT be considered a consumption good?

-Refer to the above figure. The figure represents the consumption function for a consumer. The distance between C and D represents

-Refer to the above figure. At an income of $10,000, saving is

How does a reduction in the price level affect the position of the C + I + G + X curve and in turn the equilibrium level of real GDP?

In a closed economy, equilibrium real Gross Domestic Product (GDP) occurs where

The larger is the marginal propensity to consume (MPC),

An increase in the marginal propensity to save (MPS)

Assuming that = $20,000 and C = $22,000, we would find that the average propensity to consume would be equal to

What is the significance of the multiplier? What causes the multiplier to be larger or smaller?

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

-In the above figure, at an income level of Y₃ and planned expenditures of (C + I)₁,