Question 1

If the MPC is .6,the multiplier will be:

Accepted Answer

A)  4.0. 
B)  6.0. 
C)  2.5. 
D)  1.67. 
A)  4.0. 
B)  6.0. 
C)  2.5. 
D)  1.67.

Question 2

If the consumption schedule is linear,then the:

Accepted Answer

A)  saving schedule will also be linear. 
B)  MPS will decline as income rises. 
C)  MPC will decline as income rises. 
D)  APC will be constant at all levels of income. 
A)  saving schedule will also be linear. 
B)  MPS will decline as income rises. 
C)  MPC will decline as income rises. 
D)  APC will be constant at all levels of income.

Question 3

If the MPS is only half as large as the MPC,the multiplier is:

Accepted Answer

A)  2. 
B)  3. 
C)  4. 
D)  5. 
A)  2. 
B)  3. 
C)  4. 
D)  5.

Question 4

The actual multiplier effect in the U.S.economy is less than the multiplier effect in the text examples because:

Accepted Answer

A)  the real-world MPS is larger than the MPS in the examples. 
B)  in addition to saving,households use some of any increase in income to buy imported goods and to pay additional taxes. 
C)  the gap between the nominal interest rate and the real interest rate widens as the economy expands or contracts. 
D)  the MPC in the United States is greater than 1. 
A)  the real-world MPS is larger than the MPS in the examples. 
B)  in addition to saving,households use some of any increase in income to buy imported goods and to pay additional taxes. 
C)  the gap between the nominal interest rate and the real interest rate widens as the economy expands or contracts. 
D)  the MPC in the United States is greater than 1.

Question 5

If the real interest rate in the economy is i and the expected rate of return on additional investment is r,then other things equal:

Accepted Answer

A)  more investment will be forthcoming when i exceeds r. 
B)  less investment will be forthcoming when r rises. 
C)  r will fall as more investment is undertaken. 
D)  r will exceed i at all possible levels of investment. 
A)  more investment will be forthcoming when i exceeds r. 
B)  less investment will be forthcoming when r rises. 
C)  r will fall as more investment is undertaken. 
D)  r will exceed i at all possible levels of investment.

Question 6

Answer the question on the basis of the following data for a hypothetical economy. $\begin{array}{cc}
\underline{\text { Disposable Income} } &\underline{ \text { Saving } }\
0& \mathbf{- 1 0} \
50 & 0 \
100 & 10 \
150 & 20 \
200 & 30
\end{array}$
 Refer to the given data.At the $100 level of income,the average propensity to save is:

Accepted Answer

A)  .10. 
B)  .20. 
C)  .25. 
D)  .90. 
A)  .10. 
B)  .20. 
C)  .25. 
D)  .90.

Question 7

If the saving schedule is a straight line,the:

Accepted Answer

A)  MPS must be constant. 
B)  APS must be constant. 
C)  APC must be constant. 
D)  MPC must be rising. 
A)  MPS must be constant. 
B)  APS must be constant. 
C)  APC must be constant. 
D)  MPC must be rising.

Question 8

If for some reason households become increasingly thrifty,we could show this by:

Accepted Answer

A)  a downshift of the saving schedule. 
B)  an upward shift of the consumption schedule. 
C)  an upward shift of the saving schedule. 
D)  a movement down along a stable consumption function. 
A)  a downshift of the saving schedule. 
B)  an upward shift of the consumption schedule. 
C)  an upward shift of the saving schedule. 
D)  a movement down along a stable consumption function.

Question 9

In contrast to investment,consumption is:

Accepted Answer

A)  relatively unstable. 
B)  relatively stable. 
C)  measurable. 
D)  unmeasurable. 
A)  relatively unstable. 
B)  relatively stable. 
C)  measurable. 
D)  unmeasurable.

Question 10

The saving schedule is such that as aggregate income increases by a certain amount,saving:

Accepted Answer

A)  increases by the same amount as the increase in income. 
B)  does not change. 
C)  increases,but by a smaller amount. 
D)  increases by an even larger amount. 
A)  increases by the same amount as the increase in income. 
B)  does not change. 
C)  increases,but by a smaller amount. 
D)  increases by an even larger amount.

Question 11

The multiplier shows the relationship between changes in a component of spending,say,investment,and the consequent changes in real income and output.

Accepted Answer

A) True 
 B)False

Question 12

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.   Refer to the given data.The marginal propensity to consume:

Accepted Answer

A)  is highest in economy (1). 
B)  is highest in economy (2). 
C)  is highest in economy (3). 
D)  cannot be calculated from the data given. 
A)  is highest in economy (1). 
B)  is highest in economy (2). 
C)  is highest in economy (3). 
D)  cannot be calculated from the data given.

Question 13

If the MPC is .70 and investment increases by $3 billion,the equilibrium GDP will:

Accepted Answer

A)  increase by $10 billion. 
B)  increase by $2.10 billion. 
C)  decrease by $4.29 billion. 
D)  increase by $4.29 billion. 
A)  increase by $10 billion. 
B)  increase by $2.10 billion. 
C)  decrease by $4.29 billion. 
D)  increase by $4.29 billion.

Question 14

Answer the question on the basis of the following table that illustrates the multiplier process.   Refer to the given table.The marginal propensity to save is:

Accepted Answer

A)  .5. 
B)  .25. 
C)  .2. 
D)  .1. 
A)  .5. 
B)  .25. 
C)  .2. 
D)  .1.

Question 15

The investment demand curve will shift to the right as a result of:

Accepted Answer

A)  an increase in the excess production capacity available in industry. 
B)  an increase in business taxes. 
C)  technological progress. 
D)  an increase in the acquisition and maintenance cost of capital goods. 
A)  an increase in the excess production capacity available in industry. 
B)  an increase in business taxes. 
C)  technological progress. 
D)  an increase in the acquisition and maintenance cost of capital goods.

Question 16

The investment demand slopes downward and to the right because lower real interest rates:

Accepted Answer

A)  expand consumer borrowing,making investments more profitable. 
B)  boost expected rates of returns on investment. 
C)  enable more investment projects to be undertaken profitably. 
D)  create tax incentives to invest. 
A)  expand consumer borrowing,making investments more profitable. 
B)  boost expected rates of returns on investment. 
C)  enable more investment projects to be undertaken profitably. 
D)  create tax incentives to invest.

Question 17

Art Buchwald's article "Squaring the Economic Circle" humorously describes how:

Accepted Answer

A)  a person's decision not to buy an automobile eventually reduces many people's incomes,including that of the person making the original decision. 
B)  a price increase on a single product eventually leads to rapid inflation. 
C)  an increase in imports eventually leads to a greater increase in exports. 
D)  a government tax rate increase eventually results in the government collecting less tax revenue than before the tax rate hike. 
A)  a person's decision not to buy an automobile eventually reduces many people's incomes,including that of the person making the original decision. 
B)  a price increase on a single product eventually leads to rapid inflation. 
C)  an increase in imports eventually leads to a greater increase in exports. 
D)  a government tax rate increase eventually results in the government collecting less tax revenue than before the tax rate hike.

Question 18

The investment demand curve portrays an inverse (negative)relationship between:

Accepted Answer

A)  investment and real GDP. 
B)  the real interest rate and investment. 
C)  the nominal interest rate and investment. 
D)  the price level and investment. 
A)  investment and real GDP. 
B)  the real interest rate and investment. 
C)  the nominal interest rate and investment. 
D)  the price level and investment.

Question 19

Answer the question on the basis of the following information for a private closed economy.Assume that for the entire business sector of the economy there is $0 worth of investment projects that will yield an expected rate of return of 25 percent or more.But there are $15 worth of investments that will yield an expected rate of return of 20-25 percent;another $15 with an expected rate of return of 15-20 percent;and similarly an additional $15 of investment projects in each successive rate of return range down to and including the 0-5 percent range. Refer to the given information.If the real interest rate is 15 percent,what amount of investment will be undertaken?

Accepted Answer

A)  $15. 
B)  $30. 
C)  $45. 
D)  $60. 
A)  $15. 
B)  $30. 
C)  $45. 
D)  $60.

Question 20

(Advanced analysis)Answer the question on the basis of the following consumption schedule: C = 20 + .9Y,where C is consumption and Y is disposable income. Refer to the given data.At an $800 level of disposable income,the level of saving is:

Accepted Answer

A)  $180. 
B)  $740. 
C)  $60. 
D)  $18. 
A)  $180. 
B)  $740. 
C)  $60. 
D)  $18.

If the MPC is .6,the multiplier will be:

If the consumption schedule is linear,then the:

If the MPS is only half as large as the MPC,the multiplier is:

The actual multiplier effect in the U.S.economy is less than the multiplier effect in the text examples because:

If the real interest rate in the economy is i and the expected rate of return on additional investment is r,then other things equal:

Answer the question on the basis of the following data for a hypothetical economy. 0 50 0 100 10 150 20 200 30 Refer to the given data.At the $100 level of income,the average propensity to save is:

If the saving schedule is a straight line,the:

If for some reason households become increasingly thrifty,we could show this by:

In contrast to investment,consumption is:

The saving schedule is such that as aggregate income increases by a certain amount,saving:

The multiplier shows the relationship between changes in a component of spending,say,investment,and the consequent changes in real income and output.

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the given data.The marginal propensity to consume:

If the MPC is .70 and investment increases by $3 billion,the equilibrium GDP will:

Answer the question on the basis of the following table that illustrates the multiplier process. Refer to the given table.The marginal propensity to save is:

The investment demand curve will shift to the right as a result of:

The investment demand slopes downward and to the right because lower real interest rates:

Art Buchwald's article "Squaring the Economic Circle" humorously describes how:

The investment demand curve portrays an inverse (negative)relationship between:

(Advanced analysis)Answer the question on the basis of the following consumption schedule: C = 20 + .9Y,where C is consumption and Y is disposable income. Refer to the given data.At an $800 level of disposable income,the level of saving is:

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

Filters

Exam 29: Basic Macroeconomic Relationships

If the MPC is .6,the multiplier will be:

If the consumption schedule is linear,then the:

If the MPS is only half as large as the MPC,the multiplier is:

The actual multiplier effect in the U.S.economy is less than the multiplier effect in the text examples because:

If the real interest rate in the economy is i and the expected rate of return on additional investment is r,then other things equal:

Answer the question on the basis of the following data for a hypothetical economy. 0 50 0 100 10 150 20 200 30 Refer to the given data.At the $100 level of income,the average propensity to save is:

If the saving schedule is a straight line,the:

If for some reason households become increasingly thrifty,we could show this by:

In contrast to investment,consumption is:

The saving schedule is such that as aggregate income increases by a certain amount,saving:

The multiplier shows the relationship between changes in a component of spending,say,investment,and the consequent changes in real income and output.

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the given data.The marginal propensity to consume:

If the MPC is .70 and investment increases by $3 billion,the equilibrium GDP will:

Answer the question on the basis of the following table that illustrates the multiplier process. Refer to the given table.The marginal propensity to save is:

The investment demand curve will shift to the right as a result of:

The investment demand slopes downward and to the right because lower real interest rates:

Art Buchwald's article "Squaring the Economic Circle" humorously describes how:

The investment demand curve portrays an inverse (negative)relationship between:

(Advanced analysis)Answer the question on the basis of the following consumption schedule: C = 20 + .9Y,where C is consumption and Y is disposable income. Refer to the given data.At an $800 level of disposable income,the level of saving is:

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

Filters