Question 1

Which of the following would cause the consumption function to shift downward?

Accepted Answer

A)  A decrease in taxes 
B)  A decrease in interest rates 
C)  Consumers become more pessimistic about the future 
D)  Consumers become more optimistic about the future 
E)  None of the above 
A)  A decrease in taxes 
B)  A decrease in interest rates 
C)  Consumers become more pessimistic about the future 
D)  Consumers become more optimistic about the future 
E)  None of the above

Question 2

Which of the following would not increase autonomous consumption spending?

Accepted Answer

A)  Expectations of greater future income 
B)  A lower interest rate 
C)  Reduced consumer debt 
D)  Increased household wealth 
E)  Increased disposable income 
A)  Expectations of greater future income 
B)  A lower interest rate 
C)  Reduced consumer debt 
D)  Increased household wealth 
E)  Increased disposable income

Question 3

In the short-run macro model,if the economy is in equilibrium,it must also be operating at full employment.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is not an automatic stabilizer?

Accepted Answer

A)  Forward-looking behavior 
B)  Interest rates 
C)  Imports 
D)  Transfer payments 
E)  Consumption spending 
A)  Forward-looking behavior 
B)  Interest rates 
C)  Imports 
D)  Transfer payments 
E)  Consumption spending

Question 5

Which of the following is inversely related to consumption spending?

Accepted Answer

A)  Wealth 
B)  Interest rates 
C)  Disposable income 
D)  Optimism about future income 
E)  None of the above. 
A)  Wealth 
B)  Interest rates 
C)  Disposable income 
D)  Optimism about future income 
E)  None of the above.

Question 6

Use the table below to determine the impact on consumption spending of a $100 increase in net taxes.

Accepted Answer

A)  Consumption will decrease by $80. 
B)  Consumption will increase by $80. 
C)  The marginal propensity to consume will increase to .91. 
D)  The marginal propensity to consume will decrease to .73. 
E)  The change in net taxes will not change consumption. 
A)  Consumption will decrease by $80. 
B)  Consumption will increase by $80. 
C)  The marginal propensity to consume will increase to .91. 
D)  The marginal propensity to consume will decrease to .73. 
E)  The change in net taxes will not change consumption.

Question 7

-Refer to Figure 11-9.If YFE represents the full employment level of output,the situation depicted at Y1 in the graph is

Accepted Answer

A)  impossible to achieve because employment would exceed full employment 
B)  one in which we would expect businesses to cut production 
C)  one in which we would expect businesses to increase production 
D)  identified as an expansion 
E)  identified as a recession 
A)  impossible to achieve because employment would exceed full employment 
B)  one in which we would expect businesses to cut production 
C)  one in which we would expect businesses to increase production 
D)  identified as an expansion 
E)  identified as a recession

Question 8

Aggregate expenditure will not equal GDP unless

Accepted Answer

A)  next exports are zero. 
B)  transfer payments are zero. 
C)  inventory investment is positive. 
D)  inventory investment is zero. 
E)  inventory investment is negative. 
A)  next exports are zero. 
B)  transfer payments are zero. 
C)  inventory investment is positive. 
D)  inventory investment is zero. 
E)  inventory investment is negative.

Question 9

If an initial increase in investment spending of $30 caused equilibrium output to increase by $120,what is the value of the MPC?

Accepted Answer

A)  0.25 
B)  0.50 
C)  0.60 
D)  0.75 
E)  0.80 
A)  0.25 
B)  0.50 
C)  0.60 
D)  0.75 
E)  0.80

Question 10

Suppose that after disposable income increases by $500 billion,consumption expenditures increase by $450 billion.Therefore,the marginal propensity to consume would be

Accepted Answer

A)  1.11 
B)  9.00 
C)  0.09 
D)  0.90 
E)  0.82 
A)  1.11 
B)  9.00 
C)  0.09 
D)  0.90 
E)  0.82

Question 11

Why is the effect of saving so controversial to economists?

Accepted Answer

A)  Increased saving always has an unambiguously positive effect on the economy 
B)  Increased saving always has an unambiguously negative effect on the economy 
C)  Increased saving may hurt the economy in the short run but help it in the long run 
D)  Decreased saving my hurt the economy in the short run but help it in the long run 
E)  Because different schools of economic thought use different definitions 
A)  Increased saving always has an unambiguously positive effect on the economy 
B)  Increased saving always has an unambiguously negative effect on the economy 
C)  Increased saving may hurt the economy in the short run but help it in the long run 
D)  Decreased saving my hurt the economy in the short run but help it in the long run 
E)  Because different schools of economic thought use different definitions

Question 12

In the short-run macro model,if aggregate expenditure is less than GDP,output will

Accepted Answer

A)  decline as firms cut production to stop the buildup of inventories 
B)  decline as firms increase their prices to stop the buildup of inventories 
C)  increase as firms increase production to try to stop depletion of inventories 
D)  increase as firms cut their prices to try to stop depletion of inventories 
E)  remain unchanged indefinitely unless government takes action 
A)  decline as firms cut production to stop the buildup of inventories 
B)  decline as firms increase their prices to stop the buildup of inventories 
C)  increase as firms increase production to try to stop depletion of inventories 
D)  increase as firms cut their prices to try to stop depletion of inventories 
E)  remain unchanged indefinitely unless government takes action

Question 13

What are the marginal propensity to consume and level of autonomous consumption spending for a consumption function of the following form: C = 1,200 + 0.5DI?

Accepted Answer

A)  The marginal propensity to consume is 0.5;autonomous consumption spending is $0.50. 
B)  The marginal propensity to consume is 0.5;autonomous consumption spending is $1,200. 
C)  The marginal propensity to consume is 1,200;autonomous consumption spending is $0.50. 
D)  The marginal propensity to consume is 1,200;autonomous consumption spending is $600. 
E)  There is insufficient information to answer this. 
A)  The marginal propensity to consume is 0.5;autonomous consumption spending is $0.50. 
B)  The marginal propensity to consume is 0.5;autonomous consumption spending is $1,200. 
C)  The marginal propensity to consume is 1,200;autonomous consumption spending is $0.50. 
D)  The marginal propensity to consume is 1,200;autonomous consumption spending is $600. 
E)  There is insufficient information to answer this.

Question 14

-Refer to Figure 11-3.Which of the following could explain the shift from C1 to C2?

Accepted Answer

A)  An increase in disposable income 
B)  An increase in net taxes that increases the marginal propensity to consume 
C)  A decrease in net taxes that increases the marginal propensity to consume 
D)  An increase in net taxes that increases autonomous consumption spending 
E)  A decrease in net taxes that increases autonomous consumption spending 
A)  An increase in disposable income 
B)  An increase in net taxes that increases the marginal propensity to consume 
C)  A decrease in net taxes that increases the marginal propensity to consume 
D)  An increase in net taxes that increases autonomous consumption spending 
E)  A decrease in net taxes that increases autonomous consumption spending

Question 15

If real consumption spending increases by $400 billion each time real disposable income rises by $1,000 billion,the marginal propensity to consume is

Accepted Answer

A)  40 
B)  4 
C)  0.4 
D)  0.04 
E)  0.004 
A)  40 
B)  4 
C)  0.4 
D)  0.04 
E)  0.004

Question 16

Use the table below to determine the marginal propensity to save (MPS).

Accepted Answer

A)  0 
B)  0.1 
C)  0.2 
D)  0.5 
E)  1.0 
A)  0 
B)  0.1 
C)  0.2 
D)  0.5 
E)  1.0

Question 17

The consumption function shows

Accepted Answer

A)  the relationship between consumption and saving 
B)  the relationship between consumption and real disposable income 
C)  the relationship between consumption and real income 
D)  the relationship between consumption and nominal income 
E)  the relationship between total consumption and consumption for durable goods 
A)  the relationship between consumption and saving 
B)  the relationship between consumption and real disposable income 
C)  the relationship between consumption and real income 
D)  the relationship between consumption and nominal income 
E)  the relationship between total consumption and consumption for durable goods

Question 18

If real disposable income increased by $10,000 and real consumption spending increased by $7,500,what is the marginal propensity to consume (MPC)?

Accepted Answer

A)  0.25 
B)  1.0 
C)  0.75 
D)  1.75 
E)  1.25 
A)  0.25 
B)  1.0 
C)  0.75 
D)  1.75 
E)  1.25

Question 19

When real consumption expenditure is plotted against real disposable income the resulting relationship is

Accepted Answer

A)  very weak. 
B)  positive and very curvi-linear. 
C)  positive and very close to linear. 
D)  negative and very close to linear. 
E)  virtually flat. 
A)  very weak. 
B)  positive and very curvi-linear. 
C)  positive and very close to linear. 
D)  negative and very close to linear. 
E)  virtually flat.

Question 20

The impact of saving on the economy is

Accepted Answer

A)  always beneficial 
B)  always harmful 
C)  beneficial in the short run,but not in the long run 
D)  beneficial in the long run,but not necessarily in the short run 
E)  neutral in both the short run and the long run 
A)  always beneficial 
B)  always harmful 
C)  beneficial in the short run,but not in the long run 
D)  beneficial in the long run,but not necessarily in the short run 
E)  neutral in both the short run and the long run

Exam 23: The Short-Run Macro Model

Which of the following would cause the consumption function to shift downward?

Which of the following would not increase autonomous consumption spending?

In the short-run macro model,if the economy is in equilibrium,it must also be operating at full employment.

Which of the following is not an automatic stabilizer?

Which of the following is inversely related to consumption spending?

Use the table below to determine the impact on consumption spending of a $100 increase in net taxes.

-Refer to Figure 11-9.If YFE represents the full employment level of output,the situation depicted at Y1 in the graph is

Aggregate expenditure will not equal GDP unless

If an initial increase in investment spending of $30 caused equilibrium output to increase by $120,what is the value of the MPC?

Suppose that after disposable income increases by $500 billion,consumption expenditures increase by $450 billion.Therefore,the marginal propensity to consume would be

Why is the effect of saving so controversial to economists?

In the short-run macro model,if aggregate expenditure is less than GDP,output will

What are the marginal propensity to consume and level of autonomous consumption spending for a consumption function of the following form: C = 1,200 + 0.5DI?

-Refer to Figure 11-3.Which of the following could explain the shift from C1 to C2?

If real consumption spending increases by $400 billion each time real disposable income rises by $1,000 billion,the marginal propensity to consume is

Use the table below to determine the marginal propensity to save (MPS).

The consumption function shows

If real disposable income increased by $10,000 and real consumption spending increased by $7,500,what is the marginal propensity to consume (MPC)?

When real consumption expenditure is plotted against real disposable income the resulting relationship is

The impact of saving on the economy is

What Is Economics

Scarcity,choice,and Economic Systems

Scarcity, choice, and Economic Systems: Part A

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

How Firms Make Decisions: Profit Maximization

Perfect Competition

Perfect Competition: Part A

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

labor Markets: Part A

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

What Macroeconomics Tries to Explain

Production, income, and Employment

The Price Level and Inflation

The Classical Long-Run Model

Part A: The Classical Model in an Open Economy

Economic Growth and Rising Living Standards

Economic Fluctuations

Fiscal Policy

Money,banks,and the Federal Reserve

The Money Market and Monetary Policy

Feedback Effects From GDP to the Money Market

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Appendix-finding Equilibrium GDP Algebraically

Appendix: Capital and Leverage

Filters

-Refer to Figure 11-9.If Y_FE represents the full employment level of output,the situation depicted at Y₁ in the graph is

-Refer to Figure 11-3.Which of the following could explain the shift from C₁ to C₂?