Question 1

-Refer to the above data.The marginal propensity to consume is:

Accepted Answer

A)  .80. 
B)  .75. 
C)  .20. 
D)  .25. 
A)  .80. 
B)  .75. 
C)  .20. 
D)  .25.

Question 2

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

Accepted Answer

A)  an increase in the excess productive 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 productive 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 3

The APC can be defined as the fraction of a:

Accepted Answer

A)  change in income which is not spent. 
B)  change in income which is spent. 
C)  specific level of total income which is not consumed. 
D)  specific level of total income which is consumed. 
A)  change in income which is not spent. 
B)  change in income which is spent. 
C)  specific level of total income which is not consumed. 
D)  specific level of total income which is consumed.

Question 4

Assume that for the entire business sector of a private closed economy there is $0 worth of investment projects which will yield an expected rate of return of 25 percent or more.But there are $15 worth of investments which 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.  
Which of the lines on the above diagram represents these data?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 5

The saving schedule shown in the diagram below would shift downward if,all else equal:

Accepted Answer

A)  the average propensity to save increased at each income level. 
B)  the marginal propensity to save rose at each income level. 
C)  consumer wealth rose rapidly because of a significant increase in stock market prices. 
D)  the real interest rate increased. 
A)  the average propensity to save increased at each income level. 
B)  the marginal propensity to save rose at each income level. 
C)  consumer wealth rose rapidly because of a significant increase in stock market prices. 
D)  the real interest rate increased.

Question 6

The investment-demand curve suggests:

Accepted Answer

A)  that the amount invested will not be affected by changes in the real interest rate. 
B)  an inverse relationship between the real rate of interest and the level of investment spending. 
C)  that an increase in business taxes will tend to stimulate investment spending. 
D)  a direct relationship between the real rate of interest and the level of investment spending. 
A)  that the amount invested will not be affected by changes in the real interest rate. 
B)  an inverse relationship between the real rate of interest and the level of investment spending. 
C)  that an increase in business taxes will tend to stimulate investment spending. 
D)  a direct relationship between the real rate of interest and the level of investment spending.

Question 7

The multiplier effect:

Accepted Answer

A)  reduces the MPC. 
B)  magnifies small changes in spending into larger changes in output and income. 
C)  promotes stability of the general price level. 
D)  lessens upswings and downswings in business activity. 
A)  reduces the MPC. 
B)  magnifies small changes in spending into larger changes in output and income. 
C)  promotes stability of the general price level. 
D)  lessens upswings and downswings in business activity.

Question 8

-The above schedule indicates that if the real interest rate is 8 percent,then:

Accepted Answer

A)  we cannot tell what volume of investment will be profitable. 
B)  $30 billion will be both saved and invested. 
C)  $30 billion of investment will be undertaken. 
D)  $60 billion of investment will be undertaken. 
A)  we cannot tell what volume of investment will be profitable. 
B)  $30 billion will be both saved and invested. 
C)  $30 billion of investment will be undertaken. 
D)  $60 billion of investment will be undertaken.

Question 9

If the marginal propensity to consume is .9,then the marginal propensity to save must be:

Accepted Answer

A)  1 
B)  .1. 
C)  1.1. 
D)  .9. 
A)  1 
B)  .1. 
C)  1.1. 
D)  .9.

Question 10

The relationship between consumption and disposable income is such that:

Accepted Answer

A)  an inverse and stable relationship exists between consumption and income. 
B)  a direct,but very volatile,relationship exists between consumption and income. 
C)  a direct and quite stable relationship exists between consumption and income. 
D)  the two are always equal. 
A)  an inverse and stable relationship exists between consumption and income. 
B)  a direct,but very volatile,relationship exists between consumption and income. 
C)  a direct and quite stable relationship exists between consumption and income. 
D)  the two are always equal.

Question 11

Which of the following equations correctly represents the data below?

Accepted Answer

A)  Yd = 40 + .6C 
B)  C = 60 + .4Yd 
C)  C = 40 + .6Yd 
D)  C = .6Yd 
A)  Yd = 40 + .6C 
B)  C = 60 + .4Yd 
C)  C = 40 + .6Yd 
D)  C = .6Yd

Question 12

-Refer to the above 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 13

One can determine the amount of consumption at any level of total income by:

Accepted Answer

A)  multiplying total income by the slope of the consumption schedule. 
B)  multiplying total income by the APC. 
C)  subtracting the MPS from total income. 
D)  multiplying total income by the MPC. 
A)  multiplying total income by the slope of the consumption schedule. 
B)  multiplying total income by the APC. 
C)  subtracting the MPS from total income. 
D)  multiplying total income by the MPC.

Question 14

The numerical value of the multiplier will be smaller the:

Accepted Answer

A)  larger the average propensity to consume. 
B)  larger the slope of the saving schedule. 
C)  larger the slope of the consumption schedule. 
D)  smaller the slope of the saving schedule. 
A)  larger the average propensity to consume. 
B)  larger the slope of the saving schedule. 
C)  larger the slope of the consumption schedule. 
D)  smaller the slope of the saving schedule.

Question 15

The simple multiplier applies:

Accepted Answer

A)  only when an inflationary gap exists. 
B)  to shifts in the consumption and investment schedules. 
C)  only to shifts in the investment schedule. 
D)  only to shifts in the consumption schedule. 
A)  only when an inflationary gap exists. 
B)  to shifts in the consumption and investment schedules. 
C)  only to shifts in the investment schedule. 
D)  only to shifts in the consumption schedule.

Question 16

Which of the following is correct?

Accepted Answer

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

Question 17

Assume a machine which has a useful life of only one year costs $2,000.Assume,also,that net of such operating costs as power,taxes,and so forth,the additional revenue from the output of this machine is expected to be $2,300.The expected rate of return on this machine is:

Accepted Answer

A)  7.5 percent. 
B)  10 percent. 
C)  15 percent. 
D)  20 percent. 
A)  7.5 percent. 
B)  10 percent. 
C)  15 percent. 
D)  20 percent.

Question 18

A specific investment will be undertaken if the expected rate of returns,r,exceeds the interest rate,i.

Accepted Answer

A) True 
 B)False

Question 19

The immediate determinants of investment spending are the:

Accepted Answer

A)  expected rate of return on capital goods and the real interest rate. 
B)  level of saving and the real interest rate. 
C)  marginal propensity to consume and the real interest rate. 
D)  interest rate and the expected price level. 
A)  expected rate of return on capital goods and the real interest rate. 
B)  level of saving and the real interest rate. 
C)  marginal propensity to consume and the real interest rate. 
D)  interest rate and the expected price level.

Question 20

The following table illustrates the multiplier process in a private closed economy:
  
-Refer to the above table.The total change in consumption resulting from the initial change in investment will be:

Accepted Answer

A)  $100 
B)  $96 
C)  $180 
D)  $80 
A)  $100 
B)  $96 
C)  $180 
D)  $80

-Refer to the above data.The marginal propensity to consume is:

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

The APC can be defined as the fraction of a:

The saving schedule shown in the diagram below would shift downward if,all else equal:

The investment-demand curve suggests:

The multiplier effect:

-The above schedule indicates that if the real interest rate is 8 percent,then:

If the marginal propensity to consume is .9,then the marginal propensity to save must be:

The relationship between consumption and disposable income is such that:

Which of the following equations correctly represents the data below?

-Refer to the above data.At the $100 level of income,the average propensity to save is:

One can determine the amount of consumption at any level of total income by:

The numerical value of the multiplier will be smaller the:

The simple multiplier applies:

Which of the following is correct?

Assume a machine which has a useful life of only one year costs $2,000.Assume,also,that net of such operating costs as power,taxes,and so forth,the additional revenue from the output of this machine is expected to be $2,300.The expected rate of return on this machine is:

A specific investment will be undertaken if the expected rate of returns,r,exceeds the interest rate,i.

The immediate determinants of investment spending are the:

The following table illustrates the multiplier process in a private closed economy: -Refer to the above table.The total change in consumption resulting from the initial change in investment will be:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

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Exam 10: Basic Macroeconomic Relationships

-Refer to the above data.The marginal propensity to consume is:

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

The APC can be defined as the fraction of a:

The saving schedule shown in the diagram below would shift downward if,all else equal:

The investment-demand curve suggests:

The multiplier effect:

-The above schedule indicates that if the real interest rate is 8 percent,then:

If the marginal propensity to consume is .9,then the marginal propensity to save must be:

The relationship between consumption and disposable income is such that:

Which of the following equations correctly represents the data below?

-Refer to the above data.At the $100 level of income,the average propensity to save is:

One can determine the amount of consumption at any level of total income by:

The numerical value of the multiplier will be smaller the:

The simple multiplier applies:

Which of the following is correct?

Assume a machine which has a useful life of only one year costs $2,000.Assume,also,that net of such operating costs as power,taxes,and so forth,the additional revenue from the output of this machine is expected to be $2,300.The expected rate of return on this machine is:

A specific investment will be undertaken if the expected rate of returns,r,exceeds the interest rate,i.

The immediate determinants of investment spending are the:

The following table illustrates the multiplier process in a private closed economy: -Refer to the above table.The total change in consumption resulting from the initial change in investment will be:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

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