Question 1

At the point at which planned real consumption spending is equal to real disposable income

Accepted Answer

A)  the consumption function is above the 45-degree line. 
B)  the consumption function is below the 45-degree line. 
C)  the consumption function intersects the 45-degree line. 
D)  the consumption function intersects the savings function. 
A)  the consumption function is above the 45-degree line. 
B)  the consumption function is below the 45-degree line. 
C)  the consumption function intersects the 45-degree line. 
D)  the consumption function intersects the savings function.

Question 2

Suppose that when disposable income increases by $1,000, consumption spending increases by $750. Given this information, we know that the marginal propensity to consume (MPC) is

Accepted Answer

A)  )25. 
B)  )75. 
C)  $1,000/$750 = 1.33. 
D)  1/.25 = 4. 
A)  )25. 
B)  )75. 
C)  $1,000/$750 = 1.33. 
D)  1/.25 = 4.

Question 3

-Refer to the above figure. The figure represents the saving function for the consumer. Point A 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 4

A lower price level causes the C + I + G + X curve to shift as a result of a change in all the following EXCEPT

Accepted Answer

A)  an increase in real wealth. 
B)  a decrease in interest rates. 
C)  an increase in aggregate supply. 
D)  an increase in foreign spending on domestic goods. 
A)  an increase in real wealth. 
B)  a decrease in interest rates. 
C)  an increase in aggregate supply. 
D)  an increase in foreign spending on domestic goods.

Question 5

Which of the following is negative for the "typical" consumer at some level of real disposable income?

Accepted Answer

A)  Marginal propensity to save. 
B)  Marginal propensity to consume. 
C)  Average propensity to save. 
D)  Average propensity to consume. 
A)  Marginal propensity to save. 
B)  Marginal propensity to consume. 
C)  Average propensity to save. 
D)  Average propensity to consume.

Question 6

Which of the following is true?

Accepted Answer

A)  APC + MPS = 1 
B)  MPC + MPS = 1 
C)  1 + APC = APS 
D)  APC - APS = 1 
A)  APC + MPS = 1 
B)  MPC + MPS = 1 
C)  1 + APC = APS 
D)  APC - APS = 1

Question 7

Which would increase real planned investment demand?

Accepted Answer

A)  a decrease in new technologies available 
B)  a decline in profit expectations 
C)  a decrease in business taxes 
D)  an increase in nominal interest rates 
A)  a decrease in new technologies available 
B)  a decline in profit expectations 
C)  a decrease in business taxes 
D)  an increase in nominal interest rates

Question 8

-In the above table, saving equals zero when real disposable income equals

Accepted Answer

A)  $0. 
B)  $200. 
C)  $300. 
D)  $500. 
A)  $0. 
B)  $200. 
C)  $300. 
D)  $500.

Question 9

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

Accepted Answer

A)  S = 40 - 0.67   . 
B)  S = 40 + 0.33   . 
C)  S = -40 + 0.67   . 
D)  S = -40 - 0.33   . 
A)  S = 40 - 0.67   . 
B)  S = 40 + 0.33   . 
C)  S = -40 + 0.67   . 
D)  S = -40 - 0.33   .

Question 10

If the marginal propensity to consume (MPC) decreases, then

Accepted Answer

A)  the marginal propensity to save (MPS) decreases. 
B)  the multiplier decreases. 
C)  the multiplier increases. 
D)  MPC + MPS is less than 1. 
A)  the marginal propensity to save (MPS) decreases. 
B)  the multiplier decreases. 
C)  the multiplier increases. 
D)  MPC + MPS is less than 1.

Question 11

-Refer to the above figure. Autonomous consumption is

Accepted Answer

A)  only at point A. 
B)  to the left of point B. 
C)  only at point B. 
D)  to the right of point B. 
A)  only at point A. 
B)  to the left of point B. 
C)  only at point B. 
D)  to the right of point B.

Question 12

What effect would taxation have on real consumption spending when government spending is autonomous?

Accepted Answer

A)  Taxation reduces real consumption spending. 
B)  Taxation increases real consumption spending. 
C)  Taxation causes both real consumption spending and planned real saving to increase. 
D)  None of the above is correct. 
A)  Taxation reduces real consumption spending. 
B)  Taxation increases real consumption spending. 
C)  Taxation causes both real consumption spending and planned real saving to increase. 
D)  None of the above is correct.

Question 13

According to Keynes, planned consumption

Accepted Answer

A)  decreases as disposable income increases. 
B)  is unstable and fluctuates widely with changes in disposable income. 
C)  is positively related to real disposable income. 
D)  is indirectly related to the interest rate. 
A)  decreases as disposable income increases. 
B)  is unstable and fluctuates widely with changes in disposable income. 
C)  is positively related to real disposable income. 
D)  is indirectly related to the interest rate.

Question 14

A permanent increase in autonomous investment causes

Accepted Answer

A)  a more than proportional increase in real Gross Domestic Product (GDP). 
B)  a proportional increase in real Gross Domestic Product (GDP). 
C)  a less than proportional increase in real Gross Domestic Product (GDP). 
D)  an offsetting change in saving that leaves real Gross Domestic Product (GDP) at the same level. 
A)  a more than proportional increase in real Gross Domestic Product (GDP). 
B)  a proportional increase in real Gross Domestic Product (GDP). 
C)  a less than proportional increase in real Gross Domestic Product (GDP). 
D)  an offsetting change in saving that leaves real Gross Domestic Product (GDP) at the same level.

Question 15

Autonomous consumption is defined as

Accepted Answer

A)  the level of real consumption spending that is independent of real disposable income. 
B)  the real consumption spending by the autonomous government. 
C)  the level of real consumption spending that is equal to real disposable income. 
D)  the consumption of foreign-made goods independent of exchange rates. 
A)  the level of real consumption spending that is independent of real disposable income. 
B)  the real consumption spending by the autonomous government. 
C)  the level of real consumption spending that is equal to real disposable income. 
D)  the consumption of foreign-made goods independent of exchange rates.

Question 16

-Refer to the above table. If real GDP is $12 trillion, total planned expenditures and unplanned inventory changes are respectively

Accepted Answer

A)  $14 trillion and 0. 
B)  $13.2 trillion and -$0.8 trillion. 
C)  $12.4 trillion and -$0.4 trillion. 
D)  $12.4 trillion and $0.4 trillion. 
A)  $14 trillion and 0. 
B)  $13.2 trillion and -$0.8 trillion. 
C)  $12.4 trillion and -$0.4 trillion. 
D)  $12.4 trillion and $0.4 trillion.

Question 17

If the MPC is 0.75, the multiplier is equal to

Accepted Answer

A)  0.25. 
B)  0.75/0.25 = 3. 
C)  4. 
D)  5. 
A)  0.25. 
B)  0.75/0.25 = 3. 
C)  4. 
D)  5.

Question 18

Which of the following statements is true?

Accepted Answer

A)  investment = disposable income + consumption 
B)  saving = personal income - consumption 
C)  saving = disposable income - consumption 
D)  saving = personal income + consumption 
A)  investment = disposable income + consumption 
B)  saving = personal income - consumption 
C)  saving = disposable income - consumption 
D)  saving = personal income + consumption

Question 19

Consumption expenditures include all of the following EXCEPT

Accepted Answer

A)  buying a pizza. 
B)  going to a concert. 
C)  having your house cleaned by Klean Maids. 
D)  purchasing a share of stock. 
A)  buying a pizza. 
B)  going to a concert. 
C)  having your house cleaned by Klean Maids. 
D)  purchasing a share of stock.

Question 20

When a family's income is low and it is spending more on consumption than it is receiving in income,

Accepted Answer

A)  the APC must be increasing. 
B)  the APC must be equal to the ratio of planned consumption expenditure to total saving. 
C)  the MPC must be zero. 
D)  some segment of the consumption function curve lies above the 45-degree line, indicating dissaving. 
A)  the APC must be increasing. 
B)  the APC must be equal to the ratio of planned consumption expenditure to total saving. 
C)  the MPC must be zero. 
D)  some segment of the consumption function curve lies above the 45-degree line, indicating dissaving.

Exam 12: Consumption, Real GDP, and the Multiplier

At the point at which planned real consumption spending is equal to real disposable income

Suppose that when disposable income increases by $1,000, consumption spending increases by $750. Given this information, we know that the marginal propensity to consume (MPC) is

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

A lower price level causes the C + I + G + X curve to shift as a result of a change in all the following EXCEPT

Which of the following is negative for the "typical" consumer at some level of real disposable income?

Which of the following is true?

Which would increase real planned investment demand?

-In the above table, saving equals zero when real disposable income equals

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

If the marginal propensity to consume (MPC) decreases, then

-Refer to the above figure. Autonomous consumption is

What effect would taxation have on real consumption spending when government spending is autonomous?

According to Keynes, planned consumption

A permanent increase in autonomous investment causes

Autonomous consumption is defined as

-Refer to the above table. If real GDP is $12 trillion, total planned expenditures and unplanned inventory changes are respectively

If the MPC is 0.75, the multiplier is equal to

Which of the following statements is true?

Consumption expenditures include all of the following EXCEPT

When a family's income is low and it is spending more on consumption than it is receiving in income,

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