Question 1

Which of the following is true of government purchases?​

Accepted Answer

A) They are positively related to current income. 
B) They are negatively related to current income. 
C) They are directly related to taxes. 
D) They are decided by public officials. 
E) They depend on the market rate of interest. 
A) They are positively related to current income. 
B) They are negatively related to current income. 
C) They are directly related to taxes. 
D) They are decided by public officials. 
E) They depend on the market rate of interest. D

Question 2

The table given below shows the real gross domestic product (GDP),consumption,and planned investment in an economy.The marginal propensity to save (MPS)in the economy is _____.​ ​
Table 9.3
​

Accepted Answer

A) 0 
B) 0.1​ 
C) 0.2​ 
D) 0.8​ 
E) 20​ 
A) 0 
B) 0.1​ 
C) 0.2​ 
D) 0.8​ 
E) 20​ C

Question 3

Expectations that disposable income will increase in the future will _____.​

Accepted Answer

A) shift the current consumption function upward 
B) shift the current consumption function downward​ 
C) result in an upward movement along the current consumption function​ 
D) make the current consumption function flatter​ 
E) make the current consumption function steeper​ 
A) shift the current consumption function upward 
B) shift the current consumption function downward​ 
C) result in an upward movement along the current consumption function​ 
D) make the current consumption function flatter​ 
E) make the current consumption function steeper​ A

Question 4

An increase in net wealth will:​

Accepted Answer

A) increase consumption and saving at each level of income. 
B) increase saving and decrease consumption at each level of income. 
C) decrease consumption and saving at each level of income. 
D) increase consumption and decrease saving at each level of income. 
E) have no effect on consumption because consumption is a function of income. 
A) increase consumption and saving at each level of income. 
B) increase saving and decrease consumption at each level of income. 
C) decrease consumption and saving at each level of income. 
D) increase consumption and decrease saving at each level of income. 
E) have no effect on consumption because consumption is a function of income.

Question 5

An increase in real disposable income will:​

Accepted Answer

A) increase the value of net exports of a country. 
B) decrease the value of net exports of a country. 
C) increase government purchases. 
D) decrease government purchases. 
E) increase net taxes. 
A) increase the value of net exports of a country. 
B) decrease the value of net exports of a country. 
C) increase government purchases. 
D) decrease government purchases. 
E) increase net taxes.

Question 6

Identify the correct statement.​

Accepted Answer

A) An increase in the price level in an economy will increase the real value of dollar-denominated assets. 
B) An increase in the price level in an economy will shift the aggregate expenditure line upward. 
C) An increase in the price level in an economy will decrease the equilibrium level of output demanded. 
D) An increase in the price level in an economy will cause an upward movement along the aggregate demand curve. 
E) An increase in the price level in an economy will shift the aggregate demand curve rightward. 
A) An increase in the price level in an economy will increase the real value of dollar-denominated assets. 
B) An increase in the price level in an economy will shift the aggregate expenditure line upward. 
C) An increase in the price level in an economy will decrease the equilibrium level of output demanded. 
D) An increase in the price level in an economy will cause an upward movement along the aggregate demand curve. 
E) An increase in the price level in an economy will shift the aggregate demand curve rightward.

Question 7

In the simple aggregate expenditure model,the slope of the aggregate expenditure line depends on:​

Accepted Answer

A) interest rates. 
B) real gross domestic product. 
C) the price level. 
D) the marginal propensity to consume. 
E) the marginal propensity to save. 
A) interest rates. 
B) real gross domestic product. 
C) the price level. 
D) the marginal propensity to consume. 
E) the marginal propensity to save.

Question 8

If the market interest rate equals 8 percent,the opportunity cost of the last new investment project undertaken would approximately be equal to _____.​

Accepted Answer

A) zero percent 
B) 4 percent​ 
C) infinity​ 
D) 8 percent​ 
E) 16 percent​ 
A) zero percent 
B) 4 percent​ 
C) infinity​ 
D) 8 percent​ 
E) 16 percent​

Question 9

At the equilibrium level of real gross domestic product (GDP),unplanned inventory adjustment equals _____.​

Accepted Answer

A) planned investment 
B) saving​ 
C) zero​ 
D) actual investment​ 
E) consumption​ 
A) planned investment 
B) saving​ 
C) zero​ 
D) actual investment​ 
E) consumption​

Question 10

The table given below shows the values of different components of aggregate expenditure of an economy.The marginal propensity to consume (MPC)equals:​ ​
Table 9.2
​

Accepted Answer

A) 0.20 or 1/5. 
B) 0.40 or 2/5. 
C) 0.80 or 4/5. 
D) 0.90 or 9/10. 
E) 0.60 or 3/5. 
A) 0.20 or 1/5. 
B) 0.40 or 2/5. 
C) 0.80 or 4/5. 
D) 0.90 or 9/10. 
E) 0.60 or 3/5.

Question 11

The marginal propensity to consume is:​

Accepted Answer

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

Question 12

As disposable income increases,_____.​

Accepted Answer

A) consumption and saving both increase 
B) consumption increases and saving decreases​ 
C) consumption and saving both decrease​ 
D) consumption decreases but saving increases​ 
E) saving increases,but we cannot predict what happens to consumption​ 
A) consumption and saving both increase 
B) consumption increases and saving decreases​ 
C) consumption and saving both decrease​ 
D) consumption decreases but saving increases​ 
E) saving increases,but we cannot predict what happens to consumption​

Question 13

Net taxes are:​

Accepted Answer

A) taxes plus transfer payments. 
B) taxes minus transfer payments. 
C) an injection into the economic system. 
D) consumption after taxes. 
E) government spending minus taxes. 
A) taxes plus transfer payments. 
B) taxes minus transfer payments. 
C) an injection into the economic system. 
D) consumption after taxes. 
E) government spending minus taxes.

Question 14

An upward shift of the consumption function might be caused by:​

Accepted Answer

A) an increase in disposable income. 
B) a decrease in disposable income. 
C) a decrease in the price level. 
D) a decrease in household wealth. 
E) an increase in the interest rate. 
A) an increase in disposable income. 
B) a decrease in disposable income. 
C) a decrease in the price level. 
D) a decrease in household wealth. 
E) an increase in the interest rate.

Question 15

If the spending multiplier is greater than 1.0,a $200 billion increase in autonomous investment will cause:​

Accepted Answer

A) equilibrium investment to increase by less than $200 billion. 
B) equilibrium investment to decrease by more than $200 billion. 
C) equilibrium real GDP demanded to increase by more than $200 billion. 
D) equilibrium real GDP demanded to decrease by less than $200 billion. 
E) equilibrium saving to decrease by more than $200 billion. 
A) equilibrium investment to increase by less than $200 billion. 
B) equilibrium investment to decrease by more than $200 billion. 
C) equilibrium real GDP demanded to increase by more than $200 billion. 
D) equilibrium real GDP demanded to decrease by less than $200 billion. 
E) equilibrium saving to decrease by more than $200 billion.

Question 16

Identify the correct statement about net exports.​

Accepted Answer

A) The value of net exports increases as real domestic income increases. 
B) The value of net exports increases as real domestic income decreases. 
C) The value of net exports is dependent on the amount of government purchases. 
D) The value of net exports is always positive. 
E) The value of net exports is always negative. 
A) The value of net exports increases as real domestic income increases. 
B) The value of net exports increases as real domestic income decreases. 
C) The value of net exports is dependent on the amount of government purchases. 
D) The value of net exports is always positive. 
E) The value of net exports is always negative.

Question 17

The table given below shows the disposable income and consumption of a household.In the table below,the level of saving at a disposable income of $1,200 is: ​
Table 9.1
​

Accepted Answer

A) $80​ 
B) $240​ 
C) $950​ 
D) $1,200​ 
E) $1,300​ 
A) $80​ 
B) $240​ 
C) $950​ 
D) $1,200​ 
E) $1,300​

Question 18

The difference between consumption spending and disposable income _____.​

Accepted Answer

A) decreases as income increases 
B) stays proportionally the same as income increases​ 
C) decreases if the interest rate increases​ 
D) equals the amount of taxes paid​ 
E) equals saving​ 
A) decreases as income increases 
B) stays proportionally the same as income increases​ 
C) decreases if the interest rate increases​ 
D) equals the amount of taxes paid​ 
E) equals saving​

Question 19

An increase in the price level in an economy will _____.​

Accepted Answer

A) shift the aggregate demand curve to the right 
B) shift the aggregate demand curve to the left​ 
C) increase the quantity of real gross domestic product (GDP)demanded​ 
D) decrease the quantity of real gross domestic product (GDP)demanded​ 
E) increase the aggregate expenditure​ 
A) shift the aggregate demand curve to the right 
B) shift the aggregate demand curve to the left​ 
C) increase the quantity of real gross domestic product (GDP)demanded​ 
D) decrease the quantity of real gross domestic product (GDP)demanded​ 
E) increase the aggregate expenditure​

Question 20

The aggregate expenditure line is drawn on a graph that measures:​

Accepted Answer

A) real GDP on the horizontal axis and aggregate expenditure on the vertical axis. 
B) aggregate expenditure on the horizontal axis and real GDP on the vertical axis. 
C) consumption on the horizontal axis and aggregate expenditure on the vertical axis. 
D) aggregate expenditure on the horizontal axis and consumption on the vertical axis. 
E) investment on the horizontal axis and aggregate expenditure on the vertical axis. 
A) real GDP on the horizontal axis and aggregate expenditure on the vertical axis. 
B) aggregate expenditure on the horizontal axis and real GDP on the vertical axis. 
C) consumption on the horizontal axis and aggregate expenditure on the vertical axis. 
D) aggregate expenditure on the horizontal axis and consumption on the vertical axis. 
E) investment on the horizontal axis and aggregate expenditure on the vertical axis.

Which of the following is true of government purchases?

The table given below shows the real gross domestic product (GDP),consumption,and planned investment in an economy.The marginal propensity to save (MPS)in the economy is _____. Table 9.3

Expectations that disposable income will increase in the future will _____.

An increase in net wealth will:

An increase in real disposable income will:

Identify the correct statement.

In the simple aggregate expenditure model,the slope of the aggregate expenditure line depends on:

If the market interest rate equals 8 percent,the opportunity cost of the last new investment project undertaken would approximately be equal to _____.

At the equilibrium level of real gross domestic product (GDP),unplanned inventory adjustment equals _____.

The table given below shows the values of different components of aggregate expenditure of an economy.The marginal propensity to consume (MPC)equals: Table 9.2

The marginal propensity to consume is:

As disposable income increases,_____.

Net taxes are:

An upward shift of the consumption function might be caused by:

If the spending multiplier is greater than 1.0,a $200 billion increase in autonomous investment will cause:

Identify the correct statement about net exports.

The table given below shows the disposable income and consumption of a household.In the table below,the level of saving at a disposable income of $1,200 is: Table 9.1

The difference between consumption spending and disposable income _____.

An increase in the price level in an economy will _____.

The aggregate expenditure line is drawn on a graph that measures:

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Exam 9: Aggregate Demand