Question 1

With reference to the consumption function, the 45-degree line represents

Accepted Answer

A)  the planned savings function. 
B)  all points at which planned real saving is equal to real disposable income. 
C)  all points at which planned real saving is equal to planned real consumption spending. 
D)  all points at which real disposable income is equal to real consumption spending. 
A)  the planned savings function. 
B)  all points at which planned real saving is equal to real disposable income. 
C)  all points at which planned real saving is equal to planned real consumption spending. 
D)  all points at which real disposable income is equal to real consumption spending.

Question 2

If the multiplier is 10, then the marginal propensity to consume (MPC) is

Accepted Answer

A)  0.9. 
B)  0.1. 
C)  1. 
D)  9. 
A)  0.9. 
B)  0.1. 
C)  1. 
D)  9.

Question 3

In the Keynesian model with government and the foreign sector added, what are the components of spending? Which of these components are autonomous and which are not? How is the equilibrium found? When the economy is not at an equilibrium, what adjustments are made?

Accepted Answer

There are four components to spending-co

Question 4

If saving equals $200 when real disposable income equals $1,000, the break-even income is

Accepted Answer

A)  less than $1,000. 
B)  greater than $1,000. 
C)  equal to $1,000. 
D)  equal to $1,200. 
A)  less than $1,000. 
B)  greater than $1,000. 
C)  equal to $1,000. 
D)  equal to $1,200.

Question 5

-Refer to the above figure. The figure represents the saving function for the consumer. Point B represents

Accepted Answer

A)  the amount of autonomous consumption. 
B)  a situation in which saving is positive. 
C)  a situation in which saving is negative. 
D)  the point at which saving equals zero. 
A)  the amount of autonomous consumption. 
B)  a situation in which saving is positive. 
C)  a situation in which saving is negative. 
D)  the point at which saving equals zero.

Question 6

-Use the above table. The MPC is

Accepted Answer

A)  0.91. 
B)  0.80. 
C)  0.20. 
D)  0.09. 
A)  0.91. 
B)  0.80. 
C)  0.20. 
D)  0.09.

Question 7

According to the Keynesian model, what are the two components of consumption spending? What determines how consumption changes when real disposable income changes? Explain.

Accepted Answer

Autonomous consumption is the part of co

Question 8

If the multiplier is 10 and income increases by $100, then saving will increase by

Accepted Answer

A)  $90. 
B)  $9. 
C)  $10. 
D)  $100. 
A)  $90. 
B)  $9. 
C)  $10. 
D)  $100.

Question 9

The consumption function shows

Accepted Answer

A)  a positive relationship between an individual's stock of wealth and his level of planned consumption. 
B)  a positive relationship between disposable income and planned consumption. 
C)  a negative relationship between planned consumption and aggregate saving. 
D)  a negative relationship between disposable income and planned consumption. 
A)  a positive relationship between an individual's stock of wealth and his level of planned consumption. 
B)  a positive relationship between disposable income and planned consumption. 
C)  a negative relationship between planned consumption and aggregate saving. 
D)  a negative relationship between disposable income and planned consumption.

Question 10

When you purchase Gap clothing and baseball tickets

Accepted Answer

A)  you are buying consumption goods. 
B)  you are buying capital goods. 
C)  you are consuming intermediate goods. 
D)  you are buying physical capital. 
A)  you are buying consumption goods. 
B)  you are buying capital goods. 
C)  you are consuming intermediate goods. 
D)  you are buying physical capital.

Question 11

-In the above figure, when real disposable income is less than 600, then

Accepted Answer

A)  consumption is less than disposable income. 
B)  consumption is more than disposable income. 
C)  consumption is the same as disposable income. 
D)  the MPC will fall. 
A)  consumption is less than disposable income. 
B)  consumption is more than disposable income. 
C)  consumption is the same as disposable income. 
D)  the MPC will fall.

Question 12

The larger the value of the marginal propensity to save (MPS),

Accepted Answer

A)  the larger is the value of the multiplier. 
B)  the larger is the value of the marginal propensity to consumption (MP
C) . 
C)  the larger is the value of autonomous consumption. 
D)  the smaller is the value of the multiplier. 
A)  the larger is the value of the multiplier. 
B)  the larger is the value of the marginal propensity to consumption (MP
C) . 
C)  the larger is the value of autonomous consumption. 
D)  the smaller is the value of the multiplier.

Question 13

If the MPC equals 0.75, then

Accepted Answer

A)  for every $100 increase in consumption, real Gross Domestic Product (GDP) increases by $75. 
B)  consumption is always more than real Gross Domestic Product (GDP). 
C)  for every $100 increase in real Gross Domestic Product (GDP), saving increases by $75. 
D)  for every $100 increase in real Gross Domestic Product (GDP), saving increases by $25. 
A)  for every $100 increase in consumption, real Gross Domestic Product (GDP) increases by $75. 
B)  consumption is always more than real Gross Domestic Product (GDP). 
C)  for every $100 increase in real Gross Domestic Product (GDP), saving increases by $75. 
D)  for every $100 increase in real Gross Domestic Product (GDP), saving increases by $25.

Question 14

-Refer to the above figure. The figure represents the consumption function for a consumer. Point D represents

Accepted Answer

A)  autonomous consumption. 
B)  saving. 
C)  dissaving. 
D)  zero saving. 
A)  autonomous consumption. 
B)  saving. 
C)  dissaving. 
D)  zero saving.

Question 15

When graphing the consumption function, what purpose is served by the 45-degree line?

Accepted Answer

A)  It identifies all the points at which saving and consumption spending are equal. 
B)  It identifies all the points at which real disposable income and planned real consumption spending are equal. 
C)  It identifies all the points at which real planned investment expenditure and real autonomous consumption spending are equal. 
D)  It identifies all the points where real dissaving and saving are equal. 
A)  It identifies all the points at which saving and consumption spending are equal. 
B)  It identifies all the points at which real disposable income and planned real consumption spending are equal. 
C)  It identifies all the points at which real planned investment expenditure and real autonomous consumption spending are equal. 
D)  It identifies all the points where real dissaving and saving are equal.

Question 16

-In the above table, dissaving occurs at every level of income below

Accepted Answer

A)  $10,000. 
B)  $8,000. 
C)  $7,000. 
D)  $5,000. 
A)  $10,000. 
B)  $8,000. 
C)  $7,000. 
D)  $5,000.

Question 17

Other things being constant, if the marginal propensity to save (MPS) is 0.1, and private investment spending falls by $100 million, then real Gross Domestic Product (GDP)

Accepted Answer

A)  decreases by $10 million. 
B)  increases by $90 million. 
C)  decreases by $1 billion. 
D)  increases by $1 billion. 
A)  decreases by $10 million. 
B)  increases by $90 million. 
C)  decreases by $1 billion. 
D)  increases by $1 billion.

Question 18

Saving is an example of

Accepted Answer

A)  a flow concept. 
B)  a stock concept. 
C)  a depreciation concept. 
D)  an investment concept. 
A)  a flow concept. 
B)  a stock concept. 
C)  a depreciation concept. 
D)  an investment concept.

Question 19

-Consider the above figure. The equation for the consumption function is

Accepted Answer

A)  C = 40 + 60   . 
B)  C = 40 + 50   . 
C)  C = 40 + 0.33   . 
D)  C = 40 + 0.1   . 
A)  C = 40 + 60   . 
B)  C = 40 + 50   . 
C)  C = 40 + 0.33   . 
D)  C = 40 + 0.1   .

Question 20

Saving differs from savings in that

Accepted Answer

A)  saving is a flow while savings is a stock. 
B)  saving is a stock while savings is a flow. 
C)  saving is both a flow and a stock while savings is a stock. 
D)  saving is a stock while savings is both a flow and a stock. 
A)  saving is a flow while savings is a stock. 
B)  saving is a stock while savings is a flow. 
C)  saving is both a flow and a stock while savings is a stock. 
D)  saving is a stock while savings is both a flow and a stock.

Exam 12: Consumption, Real GDP, and the Multiplier

With reference to the consumption function, the 45-degree line represents

If the multiplier is 10, then the marginal propensity to consume (MPC) is

In the Keynesian model with government and the foreign sector added, what are the components of spending? Which of these components are autonomous and which are not? How is the equilibrium found? When the economy is not at an equilibrium, what adjustments are made?

If saving equals $200 when real disposable income equals $1,000, the break-even income is

-Refer to the above figure. The figure represents the saving function for the consumer. Point B represents

-Use the above table. The MPC is

According to the Keynesian model, what are the two components of consumption spending? What determines how consumption changes when real disposable income changes? Explain.

If the multiplier is 10 and income increases by $100, then saving will increase by

The consumption function shows

When you purchase Gap clothing and baseball tickets

-In the above figure, when real disposable income is less than 600, then

The larger the value of the marginal propensity to save (MPS),

If the MPC equals 0.75, then

-Refer to the above figure. The figure represents the consumption function for a consumer. Point D represents

When graphing the consumption function, what purpose is served by the 45-degree line?

-In the above table, dissaving occurs at every level of income below

Other things being constant, if the marginal propensity to save (MPS) is 0.1, and private investment spending falls by $100 million, then real Gross Domestic Product (GDP)

Saving is an example of

-Consider the above figure. The equation for the consumption function is

Saving differs from savings in that

The Nature of Economics

Scarcity and the World of Trade-Offs

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Public Spending and Public Choice

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The Macroeconomy: Unemployment, Inflation, and Deflation

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Consumer Choice

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Perfect Competition

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