Question 1

A decrease in real disposable income will

Accepted Answer

A) shift the autonomous net export function upward 
B) shift the autonomous net export function downward 
C) cause a rightward movement along the autonomous net export function 
D) cause a leftward movement along the autonomous net export function 
E) show no movement along or shift of the autonomous net export function 
A) shift the autonomous net export function upward 
B) shift the autonomous net export function downward 
C) cause a rightward movement along the autonomous net export function 
D) cause a leftward movement along the autonomous net export function 
E) show no movement along or shift of the autonomous net export function

Question 2

Which of the following would not shift the consumption function downward?

Accepted Answer

A) a decline in business profits 
B) a decline in wealth 
C) an increase in the price level 
D) an increase in the interest rate 
E) a more pessimistic outlook about the future 
A) a decline in business profits 
B) a decline in wealth 
C) an increase in the price level 
D) an increase in the interest rate 
E) a more pessimistic outlook about the future

Question 3

An increase in the interest rate will increase consumption spending.

Accepted Answer

A) True 
 B)False

Question 4

If the MPC < 1 and a household's disposable income increases by $2,000, the household's consumption will

Accepted Answer

A) increase by less than $2,000 
B) increase by $2,000 
C) decrease if the family was wealthy before the income change 
D) remain the same unless the change in income significantly affects the household's wealth 
E) remain the same 
A) increase by less than $2,000 
B) increase by $2,000 
C) decrease if the family was wealthy before the income change 
D) remain the same unless the change in income significantly affects the household's wealth 
E) remain the same

Question 5

If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion, then consumption spending will rise by

Accepted Answer

A) $ 6 billion 
B) $14 billion 
C) $20 billion 
D) $28 billion 
E) $67 billion 
A) $ 6 billion 
B) $14 billion 
C) $20 billion 
D) $28 billion 
E) $67 billion

Question 6

Which of the following will not shift the consumption function upward?

Accepted Answer

A) a drop in the price level 
B) an increase in net wealth 
C) a drop in the interest rate 
D) expectations of lower future income 
E) expectations of higher prices in the future 
A) a drop in the price level 
B) an increase in net wealth 
C) a drop in the interest rate 
D) expectations of lower future income 
E) expectations of higher prices in the future

Question 7

Exhibit 9-2
  
-In Exhibit 9-2, the marginal propensity to save equals

Accepted Answer

A) 60 
B) 0 
C) 0.43 
D) 0.57 
E) 0.30 
A) 60 
B) 0 
C) 0.43 
D) 0.57 
E) 0.30

Question 8

Which of the following best represents the opportunity cost of investing in capital?

Accepted Answer

A) the actual revenue stream generated by the investment 
B) the expected revenue stream generated by the investment 
C) the profit that investment is expected to generate 
D) the market interest rate 
E) the purchase price of the plant and equipment 
A) the actual revenue stream generated by the investment 
B) the expected revenue stream generated by the investment 
C) the profit that investment is expected to generate 
D) the market interest rate 
E) the purchase price of the plant and equipment

Question 9

Which of the following would not shift the consumption function?

Accepted Answer

A) a change in household wealth 
B) a change in the price level 
C) a change in household disposable income 
D) a change in the level of unemployment 
E) a change in the rate of interest 
A) a change in household wealth 
B) a change in the price level 
C) a change in household disposable income 
D) a change in the level of unemployment 
E) a change in the rate of interest

Question 10

The marginal propensity to consume

Accepted Answer

A) is the proportion of disposable income consumed 
B) is the reciprocal of the ratio of disposable income to saving 
C) is the change in consumption relative to a change in disposable income 
D) minus the marginal propensity to save must equal 1 
E) is greater than 1 at all levels of income 
A) is the proportion of disposable income consumed 
B) is the reciprocal of the ratio of disposable income to saving 
C) is the change in consumption relative to a change in disposable income 
D) minus the marginal propensity to save must equal 1 
E) is greater than 1 at all levels of income

Question 11

An increase in incomes in other countries, other things equal, would cause U.S.

Accepted Answer

A) exports to decrease and imports to increase 
B) exports to increase and imports to increase 
C) imports to decrease and exports to decrease 
D) imports to increase and exports would remain unchanged 
E) imports to remain unchanged and exports to increase 
A) exports to decrease and imports to increase 
B) exports to increase and imports to increase 
C) imports to decrease and exports to decrease 
D) imports to increase and exports would remain unchanged 
E) imports to remain unchanged and exports to increase

Question 12

Consumption

Accepted Answer

A) makes up about two-thirds of GDP in a typical year 
B) exceeds GDP in years when net exports are negative 
C) is much more volatile than investment, especially during recession years 
D) is much more volatile than investment, especially during expansion years 
E) has declined as a fraction of GDP over time 
A) makes up about two-thirds of GDP in a typical year 
B) exceeds GDP in years when net exports are negative 
C) is much more volatile than investment, especially during recession years 
D) is much more volatile than investment, especially during expansion years 
E) has declined as a fraction of GDP over time

Question 13

A decrease in the price level will

Accepted Answer

A) decrease consumption because the price of goods is lower 
B) make the consumption function flatter 
C) increase consumption because prices are wages, so people have more income 
D) increase consumption because the value of wealth has increased 
E) decrease consumption because rising interest rates make it more expensive to borrow 
A) decrease consumption because the price of goods is lower 
B) make the consumption function flatter 
C) increase consumption because prices are wages, so people have more income 
D) increase consumption because the value of wealth has increased 
E) decrease consumption because rising interest rates make it more expensive to borrow

Question 14

Dennis spends $400 on a snowblower, expecting to earn $80 per year for each of the next five years clearing out his neighbors' driveways. The rate of return he expects on this investment is

Accepted Answer

A) 500 percent per year 
B) 100 percent per year 
C) 80 percent per year 
D) 25 percent per year 
E) 20 percent per year 
A) 500 percent per year 
B) 100 percent per year 
C) 80 percent per year 
D) 25 percent per year 
E) 20 percent per year

Question 15

Along the aggregate consumption function, an increase in income will

Accepted Answer

A) cause autonomous consumption to rise 
B) shift the consumption function upward 
C) cause a corresponding downward shift of the saving function 
D) cause movement along the given consumption function 
E) shift the consumption function downward 
A) cause autonomous consumption to rise 
B) shift the consumption function upward 
C) cause a corresponding downward shift of the saving function 
D) cause movement along the given consumption function 
E) shift the consumption function downward

Question 16

Consumption spending depends mainly on the level of

Accepted Answer

A) national income 
B) disposable income 
C) personal income 
D) personal income taxes 
E) imports 
A) national income 
B) disposable income 
C) personal income 
D) personal income taxes 
E) imports

Question 17

Fluctuations in consumption

Accepted Answer

A) are noticeably smaller during recessions than during expansions 
B) are roughly similar to fluctuations in investment 
C) are roughly similar to fluctuations in GDP 
D) are closely followed by economic forecasters because those fluctuations often signal that a recession will occur 
E) account for most of the variability in GDP 
A) are noticeably smaller during recessions than during expansions 
B) are roughly similar to fluctuations in investment 
C) are roughly similar to fluctuations in GDP 
D) are closely followed by economic forecasters because those fluctuations often signal that a recession will occur 
E) account for most of the variability in GDP

Question 18

If a household's income rises from $46,000 to $46,700 and its consumption spending rises from $35,800 to $36,400, then its

Accepted Answer

A) marginal propensity to consume is 0.86 
B) marginal propensity to consume is 0.99 
C) marginal propensity to consume is 0.98 
D) marginal propensity to save is 0.01 
E) marginal propensity to save is 0.86 
A) marginal propensity to consume is 0.86 
B) marginal propensity to consume is 0.99 
C) marginal propensity to consume is 0.98 
D) marginal propensity to save is 0.01 
E) marginal propensity to save is 0.86

Question 19

If the interest rate decreases, then there will be

Accepted Answer

A) a rightward movement along the autonomous investment function 
B) a leftward movement along the autonomous investment function 
C) an upward shift of the autonomous investment function 
D) a downward shift of the autonomous investment function 
E) no movement along or shift of the autonomous investment function 
A) a rightward movement along the autonomous investment function 
B) a leftward movement along the autonomous investment function 
C) an upward shift of the autonomous investment function 
D) a downward shift of the autonomous investment function 
E) no movement along or shift of the autonomous investment function

Question 20

During recession years,

Accepted Answer

A) investment declines while consumption increases 
B) investment increases while consumption declines 
C) investment is constant while consumption declines 
D) investment declines much faster than GDP declines 
E) consumption declines much faster than GDP declines 
A) investment declines while consumption increases 
B) investment increases while consumption declines 
C) investment is constant while consumption declines 
D) investment declines much faster than GDP declines 
E) consumption declines much faster than GDP declines

Exam 10: Aaggregate Expenditure and Agregate Demand

A decrease in real disposable income will

Which of the following would not shift the consumption function downward?

An increase in the interest rate will increase consumption spending.

If the MPC < 1 and a household's disposable income increases by $2,000, the household's consumption will

If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion, then consumption spending will rise by

Which of the following will not shift the consumption function upward?

Exhibit 9-2 -In Exhibit 9-2, the marginal propensity to save equals

Which of the following best represents the opportunity cost of investing in capital?

Which of the following would not shift the consumption function?

The marginal propensity to consume

An increase in incomes in other countries, other things equal, would cause U.S.

Consumption

A decrease in the price level will

Dennis spends $400 on a snowblower, expecting to earn $80 per year for each of the next five years clearing out his neighbors' driveways. The rate of return he expects on this investment is

Along the aggregate consumption function, an increase in income will

Consumption spending depends mainly on the level of

Fluctuations in consumption

If a household's income rises from $46,000 to $46,700 and its consumption spending rises from $35,800 to $36,400, then its

If the interest rate decreases, then there will be

During recession years,

The Art and Science of Economic Analysis

Understanding Graphs-Appendix

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the Us Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

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