Question 1

A decrease in the price level will

Accepted Answer

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

Question 2

When economists say investment is autonomous, they mean that investment is independent of the level of saving.

Accepted Answer

A) True 
 B)False

Question 3

If investment is autonomous, which of the following is least likely to have an effect on the level of investment?

Accepted Answer

A) a change in the rate of interest 
B) a change in the level of income 
C) a change in the level of optimism or pessimism about the economy as a whole 
D) a change in the expected profitability of investment projects 
E) a change in the rate of inflation 
A) a change in the rate of interest 
B) a change in the level of income 
C) a change in the level of optimism or pessimism about the economy as a whole 
D) a change in the expected profitability of investment projects 
E) a change in the rate of inflation

Question 4

Which of the following would shift the consumption function upward?

Accepted Answer

A) a decrease in disposable income 
B) an increase in disposable income 
C) an increase in the interest rate 
D) expectations of lower future prices 
E) an increase in net wealth 
A) a decrease in disposable income 
B) an increase in disposable income 
C) an increase in the interest rate 
D) expectations of lower future prices 
E) an increase in net wealth

Question 5

As disposable income increases, consumption spending

Accepted Answer

A) increases by the same amount 
B) decreases by the same amount 
C) increases by less than the increase in disposable income 
D) decreases by less than the increase in disposable income 
E) does not change at all 
A) increases by the same amount 
B) decreases by the same amount 
C) increases by less than the increase in disposable income 
D) decreases by less than the increase in disposable income 
E) does not change at all

Question 6

Sarah moves from Upperland, which has no taxes or transfer payments, to Lowerland, where she is hit with taxes of $2,000 and receives transfer payments of $3,000. She earns the same wage in both countries, but in Lowerland her disposable income is

Accepted Answer

A) $1,000 higher 
B) $1,000 lower 
C) $5,000 higher 
D) $2,000 lower 
E) $3,000 higher 
A) $1,000 higher 
B) $1,000 lower 
C) $5,000 higher 
D) $2,000 lower 
E) $3,000 higher

Question 7

The MPC plus the MPS equals

Accepted Answer

A) 0.5 
B) the multiplier 
C) the slope of the consumption function 
D) 1.0 
E) the slope of the saving function 
A) 0.5 
B) the multiplier 
C) the slope of the consumption function 
D) 1.0 
E) the slope of the saving function

Question 8

Which of the following is true of the autonomous investment and saving functions?

Accepted Answer

A) The autonomous investment function has a positive slope; the saving function is a horizontal line. 
B) The autonomous investment function has a negative slope; the saving function has a positive slope. 
C) The autonomous investment function is a horizontal line; the saving function has a positive slope. 
D) Both the autonomous investment function and the saving function slope upward. 
E) Both the autonomous investment function and the saving function slope downward. 
A) The autonomous investment function has a positive slope; the saving function is a horizontal line. 
B) The autonomous investment function has a negative slope; the saving function has a positive slope. 
C) The autonomous investment function is a horizontal line; the saving function has a positive slope. 
D) Both the autonomous investment function and the saving function slope upward. 
E) Both the autonomous investment function and the saving function slope downward.

Question 9

Actual investment will be larger than planned investment if there is an unintended inventory accumulation.

Accepted Answer

A) True 
 B)False

Question 10

A firm's level of investment is tied to the interest rate

Accepted Answer

A) only when the firm has to borrow funds to buy capital 
B) only when the firm has to borrow funds to buy stocks 
C) only when the firm already has the funds and could lend them 
D) because the interest rate represents the opportunity cost of investing in capital 
E) because investments are always made with borrowed funds 
A) only when the firm has to borrow funds to buy capital 
B) only when the firm has to borrow funds to buy stocks 
C) only when the firm already has the funds and could lend them 
D) because the interest rate represents the opportunity cost of investing in capital 
E) because investments are always made with borrowed funds

Question 11

Disposable income is

Accepted Answer

A) the major determinant of consumption spending 
B) total salary and wage income minus taxes and transfer payments 
C) the income households earn before taxes 
D) aggregate income plus taxes minus transfer payments 
E) a measure of income that is equivalent to GDP 
A) the major determinant of consumption spending 
B) total salary and wage income minus taxes and transfer payments 
C) the income households earn before taxes 
D) aggregate income plus taxes minus transfer payments 
E) a measure of income that is equivalent to GDP

Question 12

An rise in stock prices will __________ net wealth and __________ consumption.

Accepted Answer

A) reduce; increase 
B) reduce; decrease 
C) reduce; not change 
D) increase; increase 
E) increase; decrease 
A) reduce; increase 
B) reduce; decrease 
C) reduce; not change 
D) increase; increase 
E) increase; decrease

Question 13

As disposable income increases, saving decreases.

Accepted Answer

A) True 
 B)False

Question 14

If the market interest rate equals 8 percent, the opportunity cost of the last new investment project undertaken would be approximately 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 15

Induced consumption spending

Accepted Answer

A) represents consumption that is independent of income 
B) plus saving equals total consumption spending 
C) is positively related to disposable income 
D) is equal to autonomous consumption spending in equilibrium 
E) is the difference between autonomous consumption spending and disposable income 
A) represents consumption that is independent of income 
B) plus saving equals total consumption spending 
C) is positively related to disposable income 
D) is equal to autonomous consumption spending in equilibrium 
E) is the difference between autonomous consumption spending and disposable income

Question 16

The slope of the saving function is equal to the MPS.

Accepted Answer

A) True 
 B)False

Question 17

All of the following, except one, are characteristics of the government purchase function. Which is the exception?

Accepted Answer

A) government purchases are autonomous with respect to current income 
B) government purchases exclude transfer payments 
C) government purchases are directly related to government income 
D) government purchases are decided by public officials 
E) government purchases have increased over the past 40 years 
A) government purchases are autonomous with respect to current income 
B) government purchases exclude transfer payments 
C) government purchases are directly related to government income 
D) government purchases are decided by public officials 
E) government purchases have increased over the past 40 years

Question 18

If autonomous investment were measured on the vertical axis and disposable income were measured on the horizontal axis, what would the graph look like?

Accepted Answer

A) a horizontal line 
B) a vertical line 
C) an upward-sloping line 
D) a downward-sloping line 
E) the line would first slope upward and then slope downward 
A) a horizontal line 
B) a vertical line 
C) an upward-sloping line 
D) a downward-sloping line 
E) the line would first slope upward and then slope downward

Question 19

The relationship between consumption and income is

Accepted Answer

A) negative and unstable 
B) positive and unstable 
C) negative and stable 
D) positive and stable 
E) impossible to describe without more data 
A) negative and unstable 
B) positive and unstable 
C) negative and stable 
D) positive and stable 
E) impossible to describe without more data

A decrease in the price level will

When economists say investment is autonomous, they mean that investment is independent of the level of saving.

If investment is autonomous, which of the following is least likely to have an effect on the level of investment?

Which of the following would shift the consumption function upward?

As disposable income increases, consumption spending

Sarah moves from Upperland, which has no taxes or transfer payments, to Lowerland, where she is hit with taxes of $2,000 and receives transfer payments of $3,000. She earns the same wage in both countries, but in Lowerland her disposable income is

The MPC plus the MPS equals

Which of the following is true of the autonomous investment and saving functions?

Actual investment will be larger than planned investment if there is an unintended inventory accumulation.

A firm's level of investment is tied to the interest rate

Disposable income is

An rise in stock prices will net wealth and consumption.

As disposable income increases, saving decreases.

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

Induced consumption spending

The slope of the saving function is equal to the MPS.

All of the following, except one, are characteristics of the government purchase function. Which is the exception?

If autonomous investment were measured on the vertical axis and disposable income were measured on the horizontal axis, what would the graph look like?

The relationship between consumption and income is

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

Filters

Exam 10: Aaggregate Expenditure and Agregate Demand

A decrease in the price level will

When economists say investment is autonomous, they mean that investment is independent of the level of saving.

If investment is autonomous, which of the following is least likely to have an effect on the level of investment?

Which of the following would shift the consumption function upward?

As disposable income increases, consumption spending

Sarah moves from Upperland, which has no taxes or transfer payments, to Lowerland, where she is hit with taxes of $2,000 and receives transfer payments of $3,000. She earns the same wage in both countries, but in Lowerland her disposable income is

The MPC plus the MPS equals

Which of the following is true of the autonomous investment and saving functions?

Actual investment will be larger than planned investment if there is an unintended inventory accumulation.

A firm's level of investment is tied to the interest rate

Disposable income is

An rise in stock prices will __________ net wealth and __________ consumption.

As disposable income increases, saving decreases.

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

Induced consumption spending

The slope of the saving function is equal to the MPS.

All of the following, except one, are characteristics of the government purchase function. Which is the exception?

If autonomous investment were measured on the vertical axis and disposable income were measured on the horizontal axis, what would the graph look like?

The relationship between consumption and income is

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

Filters

An rise in stock prices will net wealth and consumption.