Question 1

Changes in the price level will not shift the consumption function.

Accepted Answer

A) True 
 B)False

Question 2

An increase in the value of the U.S.dollar relative to other currencies will

Accepted Answer

A)  shift the autonomous net export function upward 
B)  shift the autonomous net export function downward 
C)  cause a rightward movement along the autonomous net export function 
D)  cause a leftward movement along the autonomous net export function 
E)  show no movement along or shift of the autonomous net export function 
A)  shift the autonomous net export function upward 
B)  shift the autonomous net export function downward 
C)  cause a rightward movement along the autonomous net export function 
D)  cause a leftward movement along the autonomous net export function 
E)  show no movement along or shift of the autonomous net export function

Question 3

If the U.S.price level increases,other things equal,U.S.net exports

Accepted Answer

A)  increase 
B)  decrease 
C)  remain constant,since net exports are assumed to be constant 
D)  increase only if the marginal propensity to import also increases 
E)  increase only if there is lower inflation abroad 
A)  increase 
B)  decrease 
C)  remain constant,since net exports are assumed to be constant 
D)  increase only if the marginal propensity to import also increases 
E)  increase only if there is lower inflation abroad

Question 4

A decrease in the value of the U.S.dollar relative to other currencies will

Accepted Answer

A)  shift the autonomous net export function upward 
B)  shift the autonomous net export function downward 
C)  cause a rightward movement along the autonomous net export function 
D)  cause a leftward movement along the autonomous net export function 
E)  show no movement along or shift of the autonomous net export function 
A)  shift the autonomous net export function upward 
B)  shift the autonomous net export function downward 
C)  cause a rightward movement along the autonomous net export function 
D)  cause a leftward movement along the autonomous net export function 
E)  show no movement along or shift of the autonomous net export function

Question 5

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

Accepted Answer

A)  140 
B)  1.00 
C)  1.43 
D)  0.43 
E)  0.70 
A)  140 
B)  1.00 
C)  1.43 
D)  0.43 
E)  0.70

Question 6

Although consumer spending has averaged about 90 percent of disposable income,in recent years the percentage of disposable income claimed by consumption has

Accepted Answer

A)  risen to about 96 percent 
B)  risen to 100 percent 
C)  risen to 99 percent 
D)  fallen to about 76 percent 
E)  risen to about 98 percent 
A)  risen to about 96 percent 
B)  risen to 100 percent 
C)  risen to 99 percent 
D)  fallen to about 76 percent 
E)  risen to about 98 percent

Question 7

Actual investment will be larger than planned investment if there is an unintended inventory accumulation.

Accepted Answer

A) True 
 B)False

Question 8

If disposable income increases,consumption spending increases and saving decreases.

Accepted Answer

A) True 
 B)False

Question 9

If income increases by $100 and the MPS is 1/4,then the amount saved equals

Accepted Answer

A)  $50 
B)  $75 
C)  $25 
D)  $100 
E)  $33.33 
A)  $50 
B)  $75 
C)  $25 
D)  $100 
E)  $33.33

Question 10

A household that expects a decrease in disposable income in the future will

Accepted Answer

A)  increase its current consumption spending 
B)  decrease its current consumption spending 
C)  maintain its current consumption spending 
D)  increase its current consumption spending,then increase spending when income falls 
E)  decrease its current consumption spending,then increase spending when income falls 
A)  increase its current consumption spending 
B)  decrease its current consumption spending 
C)  maintain its current consumption spending 
D)  increase its current consumption spending,then increase spending when income falls 
E)  decrease its current consumption spending,then increase spending when income falls

Question 11

What is the effect on the consumption function of a decrease in disposable income?

Accepted Answer

A)  The consumption function shifts upward. 
B)  The consumption function shifts downward. 
C)  There is movement upward along the consumption function. 
D)  There is movement downward along the consumption function. 
E)  The consumption function becomes flatter. 
A)  The consumption function shifts upward. 
B)  The consumption function shifts downward. 
C)  There is movement upward along the consumption function. 
D)  There is movement downward along the consumption function. 
E)  The consumption function becomes flatter.

Question 12

If investment is autonomous,which of the following is least likely to have an effect on the level of investment?

Accepted Answer

A)  a change in the rate of interest 
B)  a change in the level of income 
C)  a change in the level of optimism or pessimism about the economy as a whole 
D)  a change in the expected profitability of investment projects 
E)  a change in the rate of inflation 
A)  a change in the rate of interest 
B)  a change in the level of income 
C)  a change in the level of optimism or pessimism about the economy as a whole 
D)  a change in the expected profitability of investment projects 
E)  a change in the rate of inflation

Question 13

The MPC is a relationship between

Accepted Answer

A)  a change in consumption and a change in income 
B)  a change in consumption and a change in saving 
C)  changes in consumption and changes in saving 
D)  the ratio of income to consumption at any given level of income 
E)  the total level of consumption and the total level of saving 
A)  a change in consumption and a change in income 
B)  a change in consumption and a change in saving 
C)  changes in consumption and changes in saving 
D)  the ratio of income to consumption at any given level of income 
E)  the total level of consumption and the total level of saving

Question 14

The primary determinant of saving is the interest rate.

Accepted Answer

A) True 
 B)False

Question 15

If income increases by $100 and consumption increases by $75,the slope of the consumption function equals

Accepted Answer

A)  1/4 
B)  1/5 
C)  1/2 
D)  3/4 
E)  3/5 
A)  1/4 
B)  1/5 
C)  1/2 
D)  3/4 
E)  3/5

Question 16

The MPC plus the MPS equals

Accepted Answer

A)  0.5 
B)  the multiplier 
C)  the slope of the consumption function 
D)  1.0 
E)  the slope of the saving function 
A)  0.5 
B)  the multiplier 
C)  the slope of the consumption function 
D)  1.0 
E)  the slope of the saving function

Question 17

The opportunity cost of investing in capital is the interest rate.

Accepted Answer

A) True 
 B)False

Question 18

An increase in the price level will

Accepted Answer

A)  increase consumption because goods are more expensive 
B)  make the consumption function steeper 
C)  increase consumption because wages will increase 
D)  decrease consumption because falling interest rates make it cheaper to borrow 
E)  decrease consumption because the value of net wealth has decreased 
A)  increase consumption because goods are more expensive 
B)  make the consumption function steeper 
C)  increase consumption because wages will increase 
D)  decrease consumption because falling interest rates make it cheaper to borrow 
E)  decrease consumption because the value of net wealth has decreased

Question 19

An upward shift of the investment function (i.e.,the one that relates investment spending to income)could be caused by

Accepted Answer

A)  an increase in income 
B)  a decrease in the interest rate 
C)  an increase in the interest rate 
D)  more pessimistic business expectations 
E)  an increase in business taxes 
A)  an increase in income 
B)  a decrease in the interest rate 
C)  an increase in the interest rate 
D)  more pessimistic business expectations 
E)  an increase in business taxes

Question 20

A grocery store manager has $600 in cash with which to buy a rug cleaner.Rental income from the cleaner would be about $75 per year.The interest rate is 11 percent.Should the manager buy the machine?

Accepted Answer

A)  Yes,since the rate of return is greater than the rate of interest. 
B)  Yes,since the manager does not have to borrow the money the interest rate is irrelevant. 
C)  No,since the yield of $75 is less than the interest cost of 11 percent. 
D)  No,since the rate of return is less than the interest rate. 
E)  Yes,since the return of $75 is greater than 11 percent. 
A)  Yes,since the rate of return is greater than the rate of interest. 
B)  Yes,since the manager does not have to borrow the money the interest rate is irrelevant. 
C)  No,since the yield of $75 is less than the interest cost of 11 percent. 
D)  No,since the rate of return is less than the interest rate. 
E)  Yes,since the return of $75 is greater than 11 percent.

Exam 9: Aggregate Expenditure

Changes in the price level will not shift the consumption function.

An increase in the value of the U.S.dollar relative to other currencies will

If the U.S.price level increases,other things equal,U.S.net exports

A decrease in the value of the U.S.dollar relative to other currencies will

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

Although consumer spending has averaged about 90 percent of disposable income,in recent years the percentage of disposable income claimed by consumption has

Actual investment will be larger than planned investment if there is an unintended inventory accumulation.

If disposable income increases,consumption spending increases and saving decreases.

If income increases by $100 and the MPS is 1/4,then the amount saved equals

A household that expects a decrease in disposable income in the future will

What is the effect on the consumption function of a decrease in disposable income?

If investment is autonomous,which of the following is least likely to have an effect on the level of investment?

The MPC is a relationship between

The primary determinant of saving is the interest rate.

If income increases by $100 and consumption increases by $75,the slope of the consumption function equals

The MPC plus the MPS equals

The opportunity cost of investing in capital is the interest rate.

An increase in the price level will

An upward shift of the investment function (i.e.,the one that relates investment spending to income)could be caused by

A grocery store manager has $600 in cash with which to buy a rug cleaner.Rental income from the cleaner would be about $75 per year.The interest rate is 11 percent.Should the manager buy the machine?

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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