Question 1

The goal of the American Recovery and Reinvestment Act of 2009 was to put money into the hands of those most likely to spend it,thus creating a positive ripple effect.

Accepted Answer

A) True 
 B)False

Question 2

Added spending causing income to grow by a larger amount is called the multiplier effect.

Accepted Answer

A) True 
 B)False

Question 3

According to Keynes,as income grows:

Accepted Answer

A)  consumption spending alone grows. 
B)  saving alone grows. 
C)  saving falls. 
D)  both consumption spending and saving grow. 
A)  consumption spending alone grows. 
B)  saving alone grows. 
C)  saving falls. 
D)  both consumption spending and saving grow.

Question 4

The formula for the simple spending multiplier is:

Accepted Answer

A)  1/(1 - MP
C) . 
B)  MPC + MPS. 
C)  1/MPC. 
D)  1/(MPC + MPS). 
A)  1/(1 - MP
C) . 
B)  MPC + MPS. 
C)  1/MPC. 
D)  1/(MPC + MPS).

Question 5

Suppose the marginal propensity to consume is 0.9.Jim decides to spend $1,000 on a small boat.How much of the new income in the first three rounds is new spending?

Accepted Answer

(Table)The table that follows shows the

Question 6

When the consumption schedule lies below the 45-degree reference line,saving:

Accepted Answer

A)  must be negative. 
B)  is zero. 
C)  is positive. 
D)  is negatively sloped. 
A)  must be negative. 
B)  is zero. 
C)  is positive. 
D)  is negatively sloped.

Question 7

To understand the paradox of thrift we must assume that investment is unrelated to income.

Accepted Answer

A) True 
 B)False

Question 8

_____ is the change in saving associated with a change in income.

Accepted Answer

A)  The average propensity to consume 
B)  The marginal propensity to consume 
C)  The average propensity to save 
D)  The marginal propensity to save 
A)  The average propensity to consume 
B)  The marginal propensity to consume 
C)  The average propensity to save 
D)  The marginal propensity to save

Question 9

If income rises from $10,000 to $20,000 and consumption increases from $9,000 to $16,000,then the marginal propensity to consume is:

Accepted Answer

A)  0.10. 
B)  0.30. 
C)  0.70. 
D)  0.80. 
A)  0.10. 
B)  0.30. 
C)  0.70. 
D)  0.80.

Question 10

If the multiplier is 2 and investment spending falls by $5 billion,then equilibrium income:

Accepted Answer

A)  increases by $10 billion. 
B)  increases by $2.5 billion. 
C)  decreases by $5 billion. 
D)  decreases by $10 billion. 
A)  increases by $10 billion. 
B)  increases by $2.5 billion. 
C)  decreases by $5 billion. 
D)  decreases by $10 billion.

Question 11

If disposable income increases from $250 to $300 and saving increases from $40 to $50,how much is the average propensity to save?

Accepted Answer

A)  0.133 
B)  0.16 
C)  0.167 
D)  0.2 
A)  0.133 
B)  0.16 
C)  0.167 
D)  0.2

Question 12

Which one of the following helps determine consumption and saving in the Keynesian model?

Accepted Answer

A)  wealth 
B)  imports 
C)  technology 
D)  government regulations 
A)  wealth 
B)  imports 
C)  technology 
D)  government regulations

Question 13

If disposable income is $3,000 and saving is $1,200,how much is consumption?

Accepted Answer

A)  −$1,200 
B)  $1,800 
C)  $2,100 
D)  $4,200 
A)  −$1,200 
B)  $1,800 
C)  $2,100 
D)  $4,200

Question 14

_____ is the change in consumption associated with a change in income.

Accepted Answer

A)  The average propensity to consume 
B)  The marginal propensity to consume 
C)  The average propensity to save 
D)  The marginal propensity to save 
A)  The average propensity to consume 
B)  The marginal propensity to consume 
C)  The average propensity to save 
D)  The marginal propensity to save

Question 15

The difference between disposable income and consumption is savings.

Accepted Answer

A) True 
 B)False

Question 16

In the Keynesian model,desired investment equals actual investment when the economy is in equilibrium.

Accepted Answer

A) True 
 B)False

Question 17

Which two countries currently have the highest savings rates?

Accepted Answer

A)  China and India 
B)  China and Japan 
C)  China and the United States 
D)  Japan and the United States 
A)  China and India 
B)  China and Japan 
C)  China and the United States 
D)  Japan and the United States

Question 18

The average propensity to consume is:

Accepted Answer

A)  always stable. 
B)  equal to consumption divided by income. 
C)  equal to income divided by consumption. 
D)  the increase in consumption derived from an increase in income. 
A)  always stable. 
B)  equal to consumption divided by income. 
C)  equal to income divided by consumption. 
D)  the increase in consumption derived from an increase in income.

Question 19

If government spending drops and taxes rise:

Accepted Answer

A)  both will lower equilibrium income,but the effects of government spending will be larger. 
B)  both will lower equilibrium income,but the effects of taxes will be larger. 
C)  both will raise equilibrium income,but the effects of government spending will be larger. 
D)  both will raise equilibrium income,but the effects of taxes will be larger. 
A)  both will lower equilibrium income,but the effects of government spending will be larger. 
B)  both will lower equilibrium income,but the effects of taxes will be larger. 
C)  both will raise equilibrium income,but the effects of government spending will be larger. 
D)  both will raise equilibrium income,but the effects of taxes will be larger.

Question 20

A tax increase has a smaller impact on the economy than does a decrease in government spending of the same magnitude because:

Accepted Answer

A)  Congress drags its feet in passing tax increases. 
B)  consumers pay for part of the tax increase by reducing their saving. 
C)  tax changes have more of a direct impact on income than does an equivalent change in government spending. 
D)  fiscal policy is weaker than monetary policy. 
A)  Congress drags its feet in passing tax increases. 
B)  consumers pay for part of the tax increase by reducing their saving. 
C)  tax changes have more of a direct impact on income than does an equivalent change in government spending. 
D)  fiscal policy is weaker than monetary policy.

The goal of the American Recovery and Reinvestment Act of 2009 was to put money into the hands of those most likely to spend it,thus creating a positive ripple effect.

Added spending causing income to grow by a larger amount is called the multiplier effect.

According to Keynes,as income grows:

The formula for the simple spending multiplier is:

Suppose the marginal propensity to consume is 0.9.Jim decides to spend $1,000 on a small boat.How much of the new income in the first three rounds is new spending?

When the consumption schedule lies below the 45-degree reference line,saving:

To understand the paradox of thrift we must assume that investment is unrelated to income.

_____ is the change in saving associated with a change in income.

If income rises from $10,000 to $20,000 and consumption increases from $9,000 to $16,000,then the marginal propensity to consume is:

If the multiplier is 2 and investment spending falls by $5 billion,then equilibrium income:

If disposable income increases from $250 to $300 and saving increases from $40 to $50,how much is the average propensity to save?

Which one of the following helps determine consumption and saving in the Keynesian model?

If disposable income is $3,000 and saving is $1,200,how much is consumption?

_____ is the change in consumption associated with a change in income.

The difference between disposable income and consumption is savings.

In the Keynesian model,desired investment equals actual investment when the economy is in equilibrium.

Which two countries currently have the highest savings rates?

The average propensity to consume is:

If government spending drops and taxes rise:

A tax increase has a smaller impact on the economy than does a decrease in government spending of the same magnitude because:

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomic

Filters

Exam 8: Aggregate Expenditures

The goal of the American Recovery and Reinvestment Act of 2009 was to put money into the hands of those most likely to spend it,thus creating a positive ripple effect.

Added spending causing income to grow by a larger amount is called the multiplier effect.

According to Keynes,as income grows:

The formula for the simple spending multiplier is:

Suppose the marginal propensity to consume is 0.9.Jim decides to spend $1,000 on a small boat.How much of the new income in the first three rounds is new spending?

When the consumption schedule lies below the 45-degree reference line,saving:

To understand the paradox of thrift we must assume that investment is unrelated to income.

_____ is the change in saving associated with a change in income.

If income rises from $10,000 to $20,000 and consumption increases from $9,000 to $16,000,then the marginal propensity to consume is:

If the multiplier is 2 and investment spending falls by $5 billion,then equilibrium income:

If disposable income increases from $250 to $300 and saving increases from $40 to $50,how much is the average propensity to save?

Which one of the following helps determine consumption and saving in the Keynesian model?

If disposable income is $3,000 and saving is $1,200,how much is consumption?

_____ is the change in consumption associated with a change in income.

The difference between disposable income and consumption is savings.

In the Keynesian model,desired investment equals actual investment when the economy is in equilibrium.

Which two countries currently have the highest savings rates?

The average propensity to consume is:

If government spending drops and taxes rise:

A tax increase has a smaller impact on the economy than does a decrease in government spending of the same magnitude because:

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomic

Filters