Question 1

Other things equal,the real interest rate and the level of investment are:

Accepted Answer

A)  related only when saving equals planned investment. 
B)  unrelated. 
C)  inversely related. 
D)  directly related. 
A)  related only when saving equals planned investment. 
B)  unrelated. 
C)  inversely related. 
D)  directly related.

Question 2

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

Accepted Answer

A)  $100 
B)  $20 
C)  $80 
D)  $200 
A)  $100 
B)  $20 
C)  $80 
D)  $200

Question 3

The multiplier is useful in determining the:

Accepted Answer

A)  full-employment unemployment rate. 
B)  level of unintended investment or disinvestment. 
C)  rate of inflation. 
D)  change in equilibrium GDP resulting from a change in spending. 
A)  full-employment unemployment rate. 
B)  level of unintended investment or disinvestment. 
C)  rate of inflation. 
D)  change in equilibrium GDP resulting from a change in spending.

Question 4

Dissaving means:

Accepted Answer

A)  the same thing as disinvesting. 
B)  that households are spending in excess of their current incomes. 
C)  that saving and investment are equal. 
D)  that disposable income is less than zero. 
A)  the same thing as disinvesting. 
B)  that households are spending in excess of their current incomes. 
C)  that saving and investment are equal. 
D)  that disposable income is less than zero.

Question 5

The simple multiplier may be calculated as:

Accepted Answer

A)  1/(MPS + MP
C) . 
B)  1/(1 - MP
C) . 
C)  MPC/MPS. 
D)  1 - MPC = MPS. 
A)  1/(MPS + MP
C) . 
B)  1/(1 - MP
C) . 
C)  MPC/MPS. 
D)  1 - MPC = MPS.

Question 6

At the point where the consumption schedule intersects the 45-degree line:

Accepted Answer

A)  the MPC equals 1. 
B)  the APC is zero. 
C)  saving equals income. 
D)  saving is zero. 
A)  the MPC equals 1. 
B)  the APC is zero. 
C)  saving equals income. 
D)  saving is zero.

Question 7

-Refer to the above diagram.The equation for the saving schedule is:

Accepted Answer

A)  S = .6Y. 
B)  Y = 60 + .6S. 
C)  S = 60 + .4Y. 
D)  S = -60 + .4Y. 
A)  S = .6Y. 
B)  Y = 60 + .6S. 
C)  S = 60 + .4Y. 
D)  S = -60 + .4Y.

Question 8

The average propensity to consume indicates the:

Accepted Answer

A)  amount by which income exceeds consumption. 
B)  relationship between a change in saving and the consequent change in consumption. 
C)  percentage of total income which will be consumed. 
D)  percentage of a change in income which will be consumed. 
A)  amount by which income exceeds consumption. 
B)  relationship between a change in saving and the consequent change in consumption. 
C)  percentage of total income which will be consumed. 
D)  percentage of a change in income which will be consumed.

Question 9

The equation C = 35 + .75Y,where C is consumption and Y is disposable income,tells us that:

Accepted Answer

A)  households will consume three-fourths of whatever level of disposable income they receive. 
B)  households will consume $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive. 
C)  there is an inverse relationship between disposable income and consumption. 
D)  households will save $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive. 
A)  households will consume three-fourths of whatever level of disposable income they receive. 
B)  households will consume $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive. 
C)  there is an inverse relationship between disposable income and consumption. 
D)  households will save $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive.

Question 10

If the firm in the previous question finds it can borrow funds at an interest rate of 10 percent the firm should:

Accepted Answer

A)  not purchase the machine because the expected rate of return exceeds the interest rate. 
B)  purchase the machine because the expected rate of return exceeds the interest rate. 
C)  not purchase the machine because the interest rate exceeds the expected rate of return. 
D)  purchase the machine because the interest rate exceeds the expected rate of return. 
A)  not purchase the machine because the expected rate of return exceeds the interest rate. 
B)  purchase the machine because the expected rate of return exceeds the interest rate. 
C)  not purchase the machine because the interest rate exceeds the expected rate of return. 
D)  purchase the machine because the interest rate exceeds the expected rate of return.

Question 11

Which of the following will not tend to shift the consumption schedule upward?

Accepted Answer

A)  a currently small stock of durable goods in the possession of consumers 
B)  the expectation of a future decline in the consumer price index 
C)  a currently low level of household debt. 
D)  the expectation of future shortages of essential consumer goods. 
A)  a currently small stock of durable goods in the possession of consumers 
B)  the expectation of a future decline in the consumer price index 
C)  a currently low level of household debt. 
D)  the expectation of future shortages of essential consumer goods.

Question 12

The real interest rate is:

Accepted Answer

A)  the percentage increase in money that the lender receives on a loan. 
B)  the nominal rate less the rate of inflation . 
C)  also called the after-tax interest rate. 
D)  usually higher than the nominal interest rate. 
A)  the percentage increase in money that the lender receives on a loan. 
B)  the nominal rate less the rate of inflation . 
C)  also called the after-tax interest rate. 
D)  usually higher than the nominal interest rate.

Question 13

The multiplier effect indicates that:

Accepted Answer

A)  a decline in the interest rate will cause a proportionately larger increase in investment. 
B)  a change in aggregate expenditures will change aggregate income by a larger amount. 
C)  a change in aggregate expenditures will increase aggregate income by the same amount. 
D)  a small increase in total income will generate a large change in aggregate expenditures. 
A)  a decline in the interest rate will cause a proportionately larger increase in investment. 
B)  a change in aggregate expenditures will change aggregate income by a larger amount. 
C)  a change in aggregate expenditures will increase aggregate income by the same amount. 
D)  a small increase in total income will generate a large change in aggregate expenditures.

Question 14

If the equation for the consumption schedule is C = 20 + 0.8Y,where C is consumption and Y is disposable income,then the average propensity to consume is 1 when disposable income is:

Accepted Answer

A)  $80 
B)  $100 
C)  $120 
D)  $160 
A)  $80 
B)  $100 
C)  $120 
D)  $160

Question 15

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.Refer to the data below.Suppose the consumption is increased by $2 billion in each of the three economies.This change could have been caused by:

Accepted Answer

A)  a decrease in consumer wealth. 
B)  expectations of higher future income. 
C)  an increase in taxation. 
D)  an increase in saving. 
A)  a decrease in consumer wealth. 
B)  expectations of higher future income. 
C)  an increase in taxation. 
D)  an increase in saving.

Question 16

The consumption schedule in the diagram below indicates that:

Accepted Answer

A)  consumers will maximize their satisfaction where the consumption schedule and 45° line intersect. 
B)  up to a point consumption exceeds income,but then falls below income. 
C)  the MPC falls as income increases. 
D)  households consume as much as they earn. 
A)  consumers will maximize their satisfaction where the consumption schedule and 45° line intersect. 
B)  up to a point consumption exceeds income,but then falls below income. 
C)  the MPC falls as income increases. 
D)  households consume as much as they earn.

Question 17

Technological progress will:

Accepted Answer

A)  shift the investment schedule downward and increase the level of employment. 
B)  shift the investment schedule downward and decrease the level of employment. 
C)  increase unplanned investment in inventories. 
D)  shift the investment schedule upward and increase the equilibrium level of GDP. 
A)  shift the investment schedule downward and increase the level of employment. 
B)  shift the investment schedule downward and decrease the level of employment. 
C)  increase unplanned investment in inventories. 
D)  shift the investment schedule upward and increase the equilibrium level of GDP.

Question 18

-Refer to the above data.The slope of the saving schedule is:

Accepted Answer

A)  .80. 
B)  .10. 
C)  .20. 
D)  .15. 
A)  .80. 
B)  .10. 
C)  .20. 
D)  .15.

Question 19

If the MPC is constant at various levels of income,then the APC must also be constant at all of these income levels.

Accepted Answer

A) True 
 B)False

Question 20

The multiplier is equal to the reciprocal of the MPC.

Accepted Answer

A) True 
 B)False

Other things equal,the real interest rate and the level of investment are:

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

The multiplier is useful in determining the:

Dissaving means:

The simple multiplier may be calculated as:

At the point where the consumption schedule intersects the 45-degree line:

-Refer to the above diagram.The equation for the saving schedule is:

The average propensity to consume indicates the:

The equation C = 35 + .75Y,where C is consumption and Y is disposable income,tells us that:

If the firm in the previous question finds it can borrow funds at an interest rate of 10 percent the firm should:

Which of the following will not tend to shift the consumption schedule upward?

The real interest rate is:

The multiplier effect indicates that:

If the equation for the consumption schedule is C = 20 + 0.8Y,where C is consumption and Y is disposable income,then the average propensity to consume is 1 when disposable income is:

The consumption schedule in the diagram below indicates that:

Technological progress will:

-Refer to the above data.The slope of the saving schedule is:

If the MPC is constant at various levels of income,then the APC must also be constant at all of these income levels.

The multiplier is equal to the reciprocal of the MPC.

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

Other things equal,the real interest rate and the level of investment are:

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

The multiplier is useful in determining the:

Dissaving means:

The simple multiplier may be calculated as:

At the point where the consumption schedule intersects the 45-degree line:

-Refer to the above diagram.The equation for the saving schedule is:

The average propensity to consume indicates the:

The equation C = 35 + .75Y,where C is consumption and Y is disposable income,tells us that:

If the firm in the previous question finds it can borrow funds at an interest rate of 10 percent the firm should:

Which of the following will not tend to shift the consumption schedule upward?

The real interest rate is:

The multiplier effect indicates that:

If the equation for the consumption schedule is C = 20 + 0.8Y,where C is consumption and Y is disposable income,then the average propensity to consume is 1 when disposable income is:

The consumption schedule in the diagram below indicates that:

Technological progress will:

-Refer to the above data.The slope of the saving schedule is:

If the MPC is constant at various levels of income,then the APC must also be constant at all of these income levels.

The multiplier is equal to the reciprocal of the MPC.

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

Filters