Question 1

In Figure 9.9,at a full-employment output level of $150 billion,the gap by which actual aggregate income or GDP is different from full-employment income or GDP is

Accepted Answer

A) An inflationary gap of $25 billion income. 
B) A recessionary gap of $50 billion income. 
C) An inflationary gap of $50 billion income. 
D) Expenditure equilibrium. 
A) An inflationary gap of $25 billion income. 
B) A recessionary gap of $50 billion income. 
C) An inflationary gap of $50 billion income. 
D) Expenditure equilibrium.

Question 2

In Figure 9.8,if full-employment income is produced at $400 billion,which of the following can prevent a recession?

Accepted Answer

A) An increase in government spending. 
B) An increase in taxes. 
C) An increase in interest rates. 
D) An increase in saving. 
A) An increase in government spending. 
B) An increase in taxes. 
C) An increase in interest rates. 
D) An increase in saving.

Question 3

In response to changing inventories in Figure 9.8,if the economy produces at full employment of $400 billion,firms will attempt to

Accepted Answer

A) Reduce employment and buy more machinery. 
B) Reduce employment and buy less machinery. 
C) Increase employment and buy more machinery. 
D) Increase employment and buy less machinery. 
A) Reduce employment and buy more machinery. 
B) Reduce employment and buy less machinery. 
C) Increase employment and buy more machinery. 
D) Increase employment and buy less machinery.

Question 4

Which of the following statements is not true about the consumption function?

Accepted Answer

A) The equation is written as C = a + bYD. 
B) It indicates the rate of consumer spending that will take place at various disposable income levels. 
C) It indicates that consumption is inversely related to disposable income. 
D) It shows how consumption is influenced by disposable income. 
A) The equation is written as C = a + bYD. 
B) It indicates the rate of consumer spending that will take place at various disposable income levels. 
C) It indicates that consumption is inversely related to disposable income. 
D) It shows how consumption is influenced by disposable income.

Question 5

Which of the following will cause the investment demand curve to shift to the right?

Accepted Answer

A) A decrease in interest rates. 
B) A decrease in the cost of labor. 
C) An increase in disposable income. 
D) An improvement in technology. 
A) A decrease in interest rates. 
B) A decrease in the cost of labor. 
C) An increase in disposable income. 
D) An improvement in technology.

Question 6

Consumption expenditures

Accepted Answer

A) Account for approximately two-thirds of total spending. 
B) Include purchases of new and used goods by consumers. 
C) Are equal to disposable personal income plus personal saving. 
D) Are equal to consumer spending plus transfer payments. 
A) Account for approximately two-thirds of total spending. 
B) Include purchases of new and used goods by consumers. 
C) Are equal to disposable personal income plus personal saving. 
D) Are equal to consumer spending plus transfer payments.

Question 7

Which government sector has the ability to respond countercyclically to the economy?

Accepted Answer

A) State only. 
B) Federal only. 
C) Local only. 
D) Federal,state,and local. 
A) State only. 
B) Federal only. 
C) Local only. 
D) Federal,state,and local.

Question 8

What must the value of the average propensity to save (APS)be if the average propensity to consume (APC)is greater than 1? Why?

Accepted Answer

The APS must be negative if the APC is g

Question 9

The marginal propensity to consume (MPC)is related to the marginal propensity to save (MPS)by the formula MPC = 1 - MPS.
Out of any additional disposable income,the MPC and MPS measure the fractions that are spent and saved,respectively.

Accepted Answer

A) True 
 B)False

Question 10

The MPC + MPS must always equal

Accepted Answer

A) The slope of the consumption function. 
B) 1. 
C) The APC. 
D) 0 
A) The slope of the consumption function. 
B) 1. 
C) The APC. 
D) 0

Question 11

Dissaving occurs whenever

Accepted Answer

A) Current supply exceeds current production. 
B) Current income falls. 
C) Current consumption exceeds current income. 
D) Current unemployment falls. 
A) Current supply exceeds current production. 
B) Current income falls. 
C) Current consumption exceeds current income. 
D) Current unemployment falls.

Question 12

Which of the following is not a determinant of autonomous consumption?

Accepted Answer

A) Wealth. 
B) Technology. 
C) Tax policy. 
D) Consumer confidence. 
A) Wealth. 
B) Technology. 
C) Tax policy. 
D) Consumer confidence.

Question 13

Gross exports depend on the behavior of foreign businesses and consumers.
The amount of exports the United States sells depends on how well consumers and businesses are doing overseas; a recession will leave them with less income so they will buy fewer U.S.exports.Likewise,U.S.imports depend directly on the U.S.economy.Higher U.S.incomes mean more consumption of both U.S.GDP as well as foreign production.

Accepted Answer

A) True 
 B)False

Question 14

Assuming that investment,government expenditures,and net exports are all autonomous,the marginal propensity to consume for the economy represented in Figure 9.9 is

Accepted Answer

A) 1.0 since aggregate expenditure is a straight line. 
B) 0.5. 
C) 0.25. 
D) Indeterminate since there is no consumption function. 
A) 1.0 since aggregate expenditure is a straight line. 
B) 0.5. 
C) 0.25. 
D) Indeterminate since there is no consumption function.

Question 15

Which of the following will cause the aggregate demand curve to shift to the left?

Accepted Answer

A) A decrease in consumer and business confidence because of a terrorist attack. 
B) A decrease in the interest rate. 
C) A decrease in business taxes. 
D) An improvement in technology. 
A) A decrease in consumer and business confidence because of a terrorist attack. 
B) A decrease in the interest rate. 
C) A decrease in business taxes. 
D) An improvement in technology.

Question 16

When the APC is greater than 1,the APS must be

Accepted Answer

A) Equal to 1. 
B) Greater than 1 also. 
C) Between 0 and 1. 
D) Negative. 
A) Equal to 1. 
B) Greater than 1 also. 
C) Between 0 and 1. 
D) Negative.

Question 17

One In the News article titled "News Release: Personal Income and Outlays" says,"Personal consumption expenditure (PCE)increased 95 billion,or 1.0 percent." An increase in spending is likely the result of

Accepted Answer

A) An increase in saving. 
B) An increase in income. 
C) An increase in taxes. 
D) A decrease in economic growth. 
A) An increase in saving. 
B) An increase in income. 
C) An increase in taxes. 
D) A decrease in economic growth.

Question 18

Given the information in Figure 9.7,dissaving would occur at all income levels below

Accepted Answer

A) $100 billion per year. 
B) $150 billion per year. 
C) $200 billion per year. 
D) $300 billion per year. 
A) $100 billion per year. 
B) $150 billion per year. 
C) $200 billion per year. 
D) $300 billion per year.

Question 19

Income transfers,such as unemployment insurance,welfare benefits,and food stamps,

Accepted Answer

A) Help stabilize aggregate demand. 
B) Destabilize aggregate demand. 
C) Have almost no impact on aggregate demand. 
D) Shift aggregate demand to the left during a recession. 
A) Help stabilize aggregate demand. 
B) Destabilize aggregate demand. 
C) Have almost no impact on aggregate demand. 
D) Shift aggregate demand to the left during a recession.

Question 20

Using the disposable income level at which the consumption function intersects the 45-degree line,we can identify

Accepted Answer

A) Full employment at the intersection point. 
B) An inflationary gap to the right of the intersection point. 
C) Dissaving to the left of the intersection point. 
D) Dissaving to the right of the intersection point. 
A) Full employment at the intersection point. 
B) An inflationary gap to the right of the intersection point. 
C) Dissaving to the left of the intersection point. 
D) Dissaving to the right of the intersection point.

In Figure 9.9,at a full-employment output level of $150 billion,the gap by which actual aggregate income or GDP is different from full-employment income or GDP is

In Figure 9.8,if full-employment income is produced at $400 billion,which of the following can prevent a recession?

In response to changing inventories in Figure 9.8,if the economy produces at full employment of $400 billion,firms will attempt to

Which of the following statements is not true about the consumption function?

Which of the following will cause the investment demand curve to shift to the right?

Consumption expenditures

Which government sector has the ability to respond countercyclically to the economy?

What must the value of the average propensity to save (APS)be if the average propensity to consume (APC)is greater than 1? Why?

The marginal propensity to consume (MPC)is related to the marginal propensity to save (MPS)by the formula MPC = 1 - MPS. Out of any additional disposable income,the MPC and MPS measure the fractions that are spent and saved,respectively.

The MPC + MPS must always equal

Dissaving occurs whenever

Which of the following is not a determinant of autonomous consumption?

Assuming that investment,government expenditures,and net exports are all autonomous,the marginal propensity to consume for the economy represented in Figure 9.9 is

Which of the following will cause the aggregate demand curve to shift to the left?

When the APC is greater than 1,the APS must be

One In the News article titled "News Release: Personal Income and Outlays" says,"Personal consumption expenditure (PCE)increased 95 billion,or 1.0 percent." An increase in spending is likely the result of

Given the information in Figure 9.7,dissaving would occur at all income levels below

Income transfers,such as unemployment insurance,welfare benefits,and food stamps,

Using the disposable income level at which the consumption function intersects the 45-degree line,we can identify

Economics: The Core Issues

The Us Economy: A Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

International Trade

International Finance

Global Poverty

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Exam 9: Aggregate Demand

In Figure 9.9,at a full-employment output level of $150 billion,the gap by which actual aggregate income or GDP is different from full-employment income or GDP is

In Figure 9.8,if full-employment income is produced at $400 billion,which of the following can prevent a recession?

In response to changing inventories in Figure 9.8,if the economy produces at full employment of $400 billion,firms will attempt to

Which of the following statements is not true about the consumption function?

Which of the following will cause the investment demand curve to shift to the right?

Consumption expenditures

Which government sector has the ability to respond countercyclically to the economy?

What must the value of the average propensity to save (APS)be if the average propensity to consume (APC)is greater than 1? Why?

The marginal propensity to consume (MPC)is related to the marginal propensity to save (MPS)by the formula MPC = 1 - MPS. Out of any additional disposable income,the MPC and MPS measure the fractions that are spent and saved,respectively.

The MPC + MPS must always equal

Dissaving occurs whenever

Which of the following is not a determinant of autonomous consumption?

Assuming that investment,government expenditures,and net exports are all autonomous,the marginal propensity to consume for the economy represented in Figure 9.9 is

Which of the following will cause the aggregate demand curve to shift to the left?

When the APC is greater than 1,the APS must be

One In the News article titled "News Release: Personal Income and Outlays" says,"Personal consumption expenditure (PCE)increased 95 billion,or 1.0 percent." An increase in spending is likely the result of

Given the information in Figure 9.7,dissaving would occur at all income levels below

Income transfers,such as unemployment insurance,welfare benefits,and food stamps,

Using the disposable income level at which the consumption function intersects the 45-degree line,we can identify

Economics: The Core Issues

The Us Economy: A Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

International Trade

International Finance

Global Poverty

Filters