Question 1

On a graph showing investment along the vertical axis and income along the horizontal axis,

Accepted Answer

A) the investment line slopes downward 
B) the investment line would shift upward if income increased 
C) the investment line would shift downward if the interest rate increased 
D) investment is the independent variable and income is the dependent variable 
E) the investment line would shift downward if income increased 
A) the investment line slopes downward 
B) the investment line would shift upward if income increased 
C) the investment line would shift downward if the interest rate increased 
D) investment is the independent variable and income is the dependent variable 
E) the investment line would shift downward if income increased

Question 2

The United States, with only one __________ of the world's population, accounts for about one __________ of the world's imports and one __________ of the world's exports.

Accepted Answer

A) twentieth, sixth, ninth 
B) sixth, ninth, twentieth 
C) ninth, twentieth, sixth 
D) twentieth, ninth, sixth 
E) ninth, sixth, twentieth 
A) twentieth, sixth, ninth 
B) sixth, ninth, twentieth 
C) ninth, twentieth, sixth 
D) twentieth, ninth, sixth 
E) ninth, sixth, twentieth

Question 3

An increase in the interest rate, other things equal, would

Accepted Answer

A) have no effect on investment 
B) increase the amount invested since the rate of return would be lower 
C) increase the amount invested because income would rise 
D) reduce the amount invested because the opportunity costs of investing would be higher 
E) increase the amount invested because the rate of return would be higher 
A) have no effect on investment 
B) increase the amount invested since the rate of return would be lower 
C) increase the amount invested because income would rise 
D) reduce the amount invested because the opportunity costs of investing would be higher 
E) increase the amount invested because the rate of return would be higher

Question 4

If investment is autonomous, an increase in income will shift the investment function upward.

Accepted Answer

A) True 
 B)False

Question 5

Historically, consumption spending in the United States has

Accepted Answer

A) increased as a percentage of income 
B) remained approximately constant as a percentage of income 
C) decreased as a percentage of income 
D) remained constant over time 
E) increased more than income 
A) increased as a percentage of income 
B) remained approximately constant as a percentage of income 
C) decreased as a percentage of income 
D) remained constant over time 
E) increased more than income

Question 6

A decrease in the value of the U.S. dollar relative to other currencies 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 7

If the U.S. price level decreases, other things equal, U.S. net exports will

Accepted Answer

A) increase 
B) decrease 
C) remain constant, since net exports are assumed to be constant 
D) increase only if the marginal propensity to import also increases 
E) increase only if there is inflation abroad 
A) increase 
B) decrease 
C) remain constant, since net exports are assumed to be constant 
D) increase only if the marginal propensity to import also increases 
E) increase only if there is inflation abroad

Question 8

As the U.S. price level decreases, other things equal, U.S. products become

Accepted Answer

A) more expensive abroad, which decreases U.S. exports 
B) less expensive abroad, which increases U.S. exports 
C) more expensive abroad, which has no effect on U.S. exports, since exports are assumed to be constant 
D) less expensive abroad, which has no effect on U.S. exports, since exports are assumed to be constant 
E) more expensive abroad, which increases U.S. exports 
A) more expensive abroad, which decreases U.S. exports 
B) less expensive abroad, which increases U.S. exports 
C) more expensive abroad, which has no effect on U.S. exports, since exports are assumed to be constant 
D) less expensive abroad, which has no effect on U.S. exports, since exports are assumed to be constant 
E) more expensive abroad, which increases U.S. exports

Question 9

The consumption function relates consumption spending to

Accepted Answer

A) the price level 
B) interest rates 
C) disposable income 
D) expectations about the price level 
E) household wealth 
A) the price level 
B) interest rates 
C) disposable income 
D) expectations about the price level 
E) household wealth

Question 10

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 11

An increase in wealth will

Accepted Answer

A) shift the consumption function upward 
B) make the consumption function steeper 
C) cause a movement upward along the consumption function 
D) cause a movement downward along the consumption function 
E) make the consumption function flatter 
A) shift the consumption function upward 
B) make the consumption function steeper 
C) cause a movement upward along the consumption function 
D) cause a movement downward along the consumption function 
E) make the consumption function flatter

Question 12

The slope of the consumption function equals the marginal propensity to consume.

Accepted Answer

A) True 
 B)False

Question 13

Exhibit 9-3
  
-In Exhibit 9-3, when real disposable income is equal to $3 billion, saving is equal to

Accepted Answer

A) $-2 billion 
B) $-1 billion 
C) 0 
D) $1 billion 
E) $2 billion 
A) $-2 billion 
B) $-1 billion 
C) 0 
D) $1 billion 
E) $2 billion

Question 14

An increase in 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, since 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, since consumption is a function of income

Question 15

If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000, then its

Accepted Answer

A) marginal propensity to consume is -0.67 
B) marginal propensity to consume is 0.88 
C) marginal propensity to consume is 0.20 
D) marginal propensity to save is zero 
E) marginal propensity to save is 0.12 
A) marginal propensity to consume is -0.67 
B) marginal propensity to consume is 0.88 
C) marginal propensity to consume is 0.20 
D) marginal propensity to save is zero 
E) marginal propensity to save is 0.12

Question 16

Which of the following would not increase the Gallego family's real net wealth?

Accepted Answer

A) an increase in the value of their home 
B) an increase in the value of Mrs. Gallego's pension fund 
C) an increase in the amount that the Gallegos have saved in the bank 
D) a rise in the price level 
E) a decrease in the size of the mortgage payments on the Gallego's home 
A) an increase in the value of their home 
B) an increase in the value of Mrs. Gallego's pension fund 
C) an increase in the amount that the Gallegos have saved in the bank 
D) a rise in the price level 
E) a decrease in the size of the mortgage payments on the Gallego's home

Question 17

Exhibit 9-1
  
-Given the data in Exhibit 9-1, the level of saving at a disposable income of $1,200 is

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

A household's net wealth is the value of

Accepted Answer

A) its current income minus the value of all its liabilities 
B) all its assets minus their tax liabilities 
C) all its assets minus the value of all its liabilities 
D) all its assets minus its income 
E) its current income minus its tax liabilities 
A) its current income minus the value of all its liabilities 
B) all its assets minus their tax liabilities 
C) all its assets minus the value of all its liabilities 
D) all its assets minus its income 
E) its current income minus its tax liabilities

Question 19

The marginal propensity to consume is defined as the

Accepted Answer

A) fraction of consumption that is spent on goods, both durable and nondurable 
B) fraction of a change in income that is spent on consumption 
C) fraction of a change in income that is spent on investment 
D) average amount of consumption at different levels of income 
E) average amount of consumption at a given level of income 
A) fraction of consumption that is spent on goods, both durable and nondurable 
B) fraction of a change in income that is spent on consumption 
C) fraction of a change in income that is spent on investment 
D) average amount of consumption at different levels of income 
E) average amount of consumption at a given level of income

Question 20

Saving in our simple model

Accepted Answer

A) varies inversely with income 
B) is determined primarily by the interest rate 
C) is positive when a person spends less than her income 
D) can never be negative because it is a stock 
E) can never be negative because it is a flow 
A) varies inversely with income 
B) is determined primarily by the interest rate 
C) is positive when a person spends less than her income 
D) can never be negative because it is a stock 
E) can never be negative because it is a flow

Exam 10: Aaggregate Expenditure and Agregate Demand

On a graph showing investment along the vertical axis and income along the horizontal axis,

The United States, with only one __________ of the world's population, accounts for about one __________ of the world's imports and one __________ of the world's exports.

An increase in the interest rate, other things equal, would

If investment is autonomous, an increase in income will shift the investment function upward.

Historically, consumption spending in the United States has

A decrease in the value of the U.S. dollar relative to other currencies will

If the U.S. price level decreases, other things equal, U.S. net exports will

As the U.S. price level decreases, other things equal, U.S. products become

The consumption function relates consumption spending to

As disposable income increases,

An increase in wealth will

The slope of the consumption function equals the marginal propensity to consume.

Exhibit 9-3 -In Exhibit 9-3, when real disposable income is equal to $3 billion, saving is equal to

An increase in wealth will

If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000, then its

Which of the following would not increase the Gallego family's real net wealth?

Exhibit 9-1 -Given the data in Exhibit 9-1, the level of saving at a disposable income of $1,200 is

A household's net wealth is the value of

The marginal propensity to consume is defined as the

Saving in our simple model

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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The United States, with only one of the world's population, accounts for about one of the world's imports and one __ of the world's exports.