Question 1

If autonomous net taxes increase by $10 trillion and the marginal propensity to consume is 0.8, consumption initially will

Accepted Answer

A) increase by $50 trillion 
B) decrease by $10 trillion 
C) decrease by $8 trillion 
D) increase by $10 trillion 
E) decrease by $50 trillion 
A) increase by $50 trillion 
B) decrease by $10 trillion 
C) decrease by $8 trillion 
D) increase by $10 trillion 
E) decrease by $50 trillion

Question 2

Exhibit 9-2
 
-We can tell from the data in Exhibit 9-2 that planned investment is autonomous because

Accepted Answer

A) actual investment is constant at each level of income 
B) it does not vary as consumption changes 
C) it does not vary as income changes 
D) it does not vary as the actual investment changes 
E) it does not vary as the price level changes 
A) actual investment is constant at each level of income 
B) it does not vary as consumption changes 
C) it does not vary as income changes 
D) it does not vary as the actual investment changes 
E) it does not vary as the price level changes

Question 3

Expectations that the price level will increase in the future will

Accepted Answer

A) shift the current consumption function upward 
B) make the current consumption function steeper 
C) make the current consumption function flatter 
D) result in a movement downward along the current consumption function 
E) have no effect on the current consumption function 
A) shift the current consumption function upward 
B) make the current consumption function steeper 
C) make the current consumption function flatter 
D) result in a movement downward along the current consumption function 
E) have no effect on the current consumption function

Question 4

The most important determinant of a household's consumption spending is

Accepted Answer

A) its disposable income 
B) its total wealth 
C) the number of persons in the household 
D) its net wealth 
E) the ratio of wage to nonwage income the household earns 
A) its disposable income 
B) its total wealth 
C) the number of persons in the household 
D) its net wealth 
E) the ratio of wage to nonwage income the household earns

Question 5

If income rises from $6.0 trillion to $6.4 trillion, consumption rises from $5.5 trillion to $5.8 trillion. What is the slope of the aggregate expenditure line? (Assume there is neither international trade nor any government.)

Accepted Answer

A) 0.25 
B) 0.33 
C) 0.67 
D) 0.75 
E) 1.33 
A) 0.25 
B) 0.33 
C) 0.67 
D) 0.75 
E) 1.33

Question 6

The primary determinant of consumption spending is the price level.

Accepted Answer

A) True 
 B)False

Question 7

Autonomous consumption expenditures are

Accepted Answer

A) identical to induced consumption 
B) determined primarily by transfer payments 
C) not influenced by disposable income 
D) increasing at a decreasing rate 
E) increasing at an increasing rate 
A) identical to induced consumption 
B) determined primarily by transfer payments 
C) not influenced by disposable income 
D) increasing at a decreasing rate 
E) increasing at an increasing rate

Question 8

The primary determinant of saving is income.

Accepted Answer

A) True 
 B)False

Question 9

The marginal propensity to consume measures the change in consumption divided by the change in income.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is the most volatile component of GDP?

Accepted Answer

A) investment (I) 
B) consumption (
C)  
C) saving (S) 
D) government purchases (G) 
E) net exports (X - M) 
A) investment (I) 
B) consumption (
C)  
C) saving (S) 
D) government purchases (G) 
E) net exports (X - M)

Question 11

The fraction of an increase in income that is saved is referred to as the

Accepted Answer

A) marginal propensity to save 
B) average propensity to save 
C) marginal propensity to consume 
D) average propensity to consume 
E) saving-consumption ratio (i.e., saving divided by consumption spending) 
A) marginal propensity to save 
B) average propensity to save 
C) marginal propensity to consume 
D) average propensity to consume 
E) saving-consumption ratio (i.e., saving divided by consumption spending)

Question 12

As the U.S. price level increases, 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 13

An increase 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 14

If the interest rate increases, 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 15

The inverse of the slope of the consumption function equals the marginal propensity to save.

Accepted Answer

A) True 
 B)False

Question 16

If a household's income falls from $26,000 to $24,000 and its saving falls from $1,000 to $500, then its

Accepted Answer

A) marginal propensity to consume is 0.98 
B) marginal propensity to consume is 1.33 
C) marginal propensity to consume is 0.75 
D) marginal propensity to save is 0.02 
E) marginal propensity to save is 0.4 
A) marginal propensity to consume is 0.98 
B) marginal propensity to consume is 1.33 
C) marginal propensity to consume is 0.75 
D) marginal propensity to save is 0.02 
E) marginal propensity to save is 0.4

Question 17

A grocery store manager must decide whether to buy a rug cleaner to rent to customers. The cleaner costs $800. It is expected to yield $200 in income per year. What is the expected annual rate of return from the cleaner?

Accepted Answer

A) $600 
B) $200 
C) 400 percent 
D) 75 percent 
E) 25 percent 
A) $600 
B) $200 
C) 400 percent 
D) 75 percent 
E) 25 percent

Question 18

If a household's income falls from $26,000 to $24,000 and its consumption spending falls from $25,000 to $23,500, then its

Accepted Answer

A) marginal propensity to consume is 0.98 
B) marginal propensity to consume is 1.33 
C) marginal propensity to consume is 0.94 
D) marginal propensity to save is 0.02 
E) marginal propensity to save is 0.25 
A) marginal propensity to consume is 0.98 
B) marginal propensity to consume is 1.33 
C) marginal propensity to consume is 0.94 
D) marginal propensity to save is 0.02 
E) marginal propensity to save is 0.25

Question 19

The primary determinant of saving is the interest rate.

Accepted Answer

A) True 
 B)False

Question 20

What is the effect on the consumption function of an increase in disposable income?

Accepted Answer

A) The consumption function shifts upward. 
B) The consumption function shifts downward. 
C) There is movement upward along the consumption function. 
D) There is movement downward along the consumption function. 
E) The consumption function becomes steeper. 
A) The consumption function shifts upward. 
B) The consumption function shifts downward. 
C) There is movement upward along the consumption function. 
D) There is movement downward along the consumption function. 
E) The consumption function becomes steeper.

Exam 10: Aaggregate Expenditure and Agregate Demand

If autonomous net taxes increase by $10 trillion and the marginal propensity to consume is 0.8, consumption initially will

Exhibit 9-2 -We can tell from the data in Exhibit 9-2 that planned investment is autonomous because

Expectations that the price level will increase in the future will

The most important determinant of a household's consumption spending is

If income rises from $6.0 trillion to $6.4 trillion, consumption rises from $5.5 trillion to $5.8 trillion. What is the slope of the aggregate expenditure line? (Assume there is neither international trade nor any government.)

The primary determinant of consumption spending is the price level.

Autonomous consumption expenditures are

The primary determinant of saving is income.

The marginal propensity to consume measures the change in consumption divided by the change in income.

Which of the following is the most volatile component of GDP?

The fraction of an increase in income that is saved is referred to as the

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

An increase in real disposable income will

If the interest rate increases, then there will be

The inverse of the slope of the consumption function equals the marginal propensity to save.

If a household's income falls from $26,000 to $24,000 and its saving falls from $1,000 to $500, then its

A grocery store manager must decide whether to buy a rug cleaner to rent to customers. The cleaner costs $800. It is expected to yield $200 in income per year. What is the expected annual rate of return from the cleaner?

If a household's income falls from $26,000 to $24,000 and its consumption spending falls from $25,000 to $23,500, then its

The primary determinant of saving is the interest rate.

What is the effect on the consumption function of an increase in disposable income?

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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