Question 1

If consumption is greater than income,saving must be negative.

Accepted Answer

A) True 
 B)False  True

Question 2

The consumption function assumes that

Accepted Answer

A)  only disposable income affects consumption 
B)  only the price level affects consumption 
C)  many factors other than disposable income affect consumption,and each is allowed to vary along the consumption function 
D)  factors other than disposable income affect consumption,but those are held constant along the consumption function 
E)  only consumer expectations affect consumption 
A)  only disposable income affects consumption 
B)  only the price level affects consumption 
C)  many factors other than disposable income affect consumption,and each is allowed to vary along the consumption function 
D)  factors other than disposable income affect consumption,but those are held constant along the consumption function 
E)  only consumer expectations affect consumption D

Question 3

Exhibit 9-2
  
-In Exhibit 9-2,the marginal propensity to save equals

Accepted Answer

A)  60 
B)  0 
C)  0.43 
D)  0.57 
E)  0.30 
A)  60 
B)  0 
C)  0.43 
D)  0.57 
E)  0.30 E

Question 4

An increase in the interest rate,other things equal,would

Accepted Answer

A)  have no effect on investment 
B)  increase the amount invested since the rate of return would be lower 
C)  increase the amount invested because income would rise 
D)  reduce the amount invested because the opportunity costs of investing would be higher 
E)  increase the amount invested because the rate of return would be higher 
A)  have no effect on investment 
B)  increase the amount invested since the rate of return would be lower 
C)  increase the amount invested because income would rise 
D)  reduce the amount invested because the opportunity costs of investing would be higher 
E)  increase the amount invested because the rate of return would be higher

Question 5

When economists say investment is autonomous,they mean that investment is independent of the level of saving.

Accepted Answer

A) True 
 B)False

Question 6

An increase in the interest rate,other things constant,decreases the amount of investment spending.

Accepted Answer

A) True 
 B)False

Question 7

If income rises from $6.0 trillion to $6.4 trillion,consumption rises from $5.5 trillion to $5.8 trillion.What is the slope of the aggregate expenditure line? (Assume there is neither international trade nor any government.)

Accepted Answer

A)  0.25 
B)  0.33 
C)  0.67 
D)  0.75 
E)  1.33 
A)  0.25 
B)  0.33 
C)  0.67 
D)  0.75 
E)  1.33

Question 8

If business managers become more optimistic about future sales and profits,then there will be

Accepted Answer

A)  a rightward movement along the autonomous investment function 
B)  a leftward movement along the autonomous investment function 
C)  an upward shift of the autonomous investment function 
D)  a downward shift of the autonomous investment function 
E)  no movement along or shift of the autonomous investment function 
A)  a rightward movement along the autonomous investment function 
B)  a leftward movement along the autonomous investment function 
C)  an upward shift of the autonomous investment function 
D)  a downward shift of the autonomous investment function 
E)  no movement along or shift of the autonomous investment function

Question 9

Economists assume that the fundamental motive of investors is

Accepted Answer

A)  to maximize profit 
B)  to maximize income 
C)  to maximize the firm's growth 
D)  to promote economic growth for the economy as a whole 
E)  the desire to save 
A)  to maximize profit 
B)  to maximize income 
C)  to maximize the firm's growth 
D)  to promote economic growth for the economy as a whole 
E)  the desire to save

Question 10

The consumption function relates consumption spending to

Accepted Answer

A)  the price level 
B)  interest rates 
C)  disposable income 
D)  expectations about the price level 
E)  household wealth 
A)  the price level 
B)  interest rates 
C)  disposable income 
D)  expectations about the price level 
E)  household wealth

Question 11

The economy's investment demand curve shows the inverse relationship between the quantity of investment demanded and the market interest rate,other things held constant.

Accepted Answer

A) True 
 B)False

Question 12

If the interest rate increases,then there will be

Accepted Answer

A)  a rightward movement along the autonomous investment function 
B)  a leftward movement along the autonomous investment function 
C)  an upward shift of the autonomous investment function 
D)  a downward shift of the autonomous investment function 
E)  no movement along or shift of the autonomous investment function 
A)  a rightward movement along the autonomous investment function 
B)  a leftward movement along the autonomous investment function 
C)  an upward shift of the autonomous investment function 
D)  a downward shift of the autonomous investment function 
E)  no movement along or shift of the autonomous investment function

Question 13

The current level of investment depends on the current level of income.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following would shift the consumption function downward?

Accepted Answer

A)  a decrease in stock prices 
B)  a lower interest rate 
C)  a lower price level 
D)  lower disposable income 
E)  expectations of higher future prices 
A)  a decrease in stock prices 
B)  a lower interest rate 
C)  a lower price level 
D)  lower disposable income 
E)  expectations of higher future prices

Question 15

The interest rate is important to the investment decision

Accepted Answer

A)  only when funds must be borrowed 
B)  only when firms have the money on hand 
C)  regardless of whether funds must be borrowed or firms have the funds on hand 
D)  only when the firm has funds on hand and is ready to lend them 
E)  only when the firm is purchasing new equipment rather than a new building 
A)  only when funds must be borrowed 
B)  only when firms have the money on hand 
C)  regardless of whether funds must be borrowed or firms have the funds on hand 
D)  only when the firm has funds on hand and is ready to lend them 
E)  only when the firm is purchasing new equipment rather than a new building

Question 16

The primary determinant of saving is income.

Accepted Answer

A) True 
 B)False

Question 17

Exhibit 9-1
  
-Given the data in Exhibit 9-1,the level of saving at a disposable income of $1,200 is

Accepted Answer

A)  $80 
B)  $240 
C)  $950 
D)  $1,200 
E)  $1,300 
A)  $80 
B)  $240 
C)  $950 
D)  $1,200 
E)  $1,300

Question 18

A firm's level of investment is tied to the interest rate

Accepted Answer

A)  only when the firm has to borrow funds to buy capital 
B)  only when the firm has to borrow funds to buy stocks 
C)  only when the firm already has the funds and could lend them 
D)  because the interest rate represents the opportunity cost of investing in capital 
E)  because investments are always made with borrowed funds 
A)  only when the firm has to borrow funds to buy capital 
B)  only when the firm has to borrow funds to buy stocks 
C)  only when the firm already has the funds and could lend them 
D)  because the interest rate represents the opportunity cost of investing in capital 
E)  because investments are always made with borrowed funds

Question 19

The marginal propensity to consume

Accepted Answer

A)  is the proportion of disposable income consumed 
B)  is the reciprocal of the ratio of disposable income to saving 
C)  is the change in consumption relative to a change in disposable income 
D)  minus the marginal propensity to save must equal 1 
E)  is greater than 1 at all levels of income 
A)  is the proportion of disposable income consumed 
B)  is the reciprocal of the ratio of disposable income to saving 
C)  is the change in consumption relative to a change in disposable income 
D)  minus the marginal propensity to save must equal 1 
E)  is greater than 1 at all levels of income

Question 20

A decrease in the price level will

Accepted Answer

A)  shift the consumption function upward 
B)  make the consumption function steeper 
C)  result in a movement upward along the consumption function 
D)  result in a movement downward along the consumption function 
E)  have no effect on the consumption function 
A)  shift the consumption function upward 
B)  make the consumption function steeper 
C)  result in a movement upward along the consumption function 
D)  result in a movement downward along the consumption function 
E)  have no effect on the consumption function

Exam 9: Aggregate Expenditure

If consumption is greater than income,saving must be negative.

The consumption function assumes that

Exhibit 9-2 -In Exhibit 9-2,the marginal propensity to save equals

An increase in the interest rate,other things equal,would

When economists say investment is autonomous,they mean that investment is independent of the level of saving.

An increase in the interest rate,other things constant,decreases the amount of investment spending.

If income rises from $6.0 trillion to $6.4 trillion,consumption rises from $5.5 trillion to $5.8 trillion.What is the slope of the aggregate expenditure line? (Assume there is neither international trade nor any government.)

If business managers become more optimistic about future sales and profits,then there will be

Economists assume that the fundamental motive of investors is

The consumption function relates consumption spending to

The economy's investment demand curve shows the inverse relationship between the quantity of investment demanded and the market interest rate,other things held constant.

If the interest rate increases,then there will be

The current level of investment depends on the current level of income.

Which of the following would shift the consumption function downward?

The interest rate is important to the investment decision

The primary determinant of saving is income.

Exhibit 9-1 -Given the data in Exhibit 9-1,the level of saving at a disposable income of $1,200 is

A firm's level of investment is tied to the interest rate

The marginal propensity to consume

A decrease in the price level will

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Productivity and Growth

Tracking the US Economy

Unemployment and Inflation

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

International Finance

Developing and Transitional Economies

Understanding Graphs

National Income Accounts

Variable Net Exports

Variable Net Exports Revisited

The Algebra of Income and Expenditure

The Algebra of Demand-Side Equilibrium

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