Question 1

An upward shift of the investment function (i.e.,the one that relates investment spending to income)could be caused by

Accepted Answer

A) an increase in income 
B) a decrease in the interest rate 
C) an increase in the interest rate 
D) more pessimistic business expectations 
E) an increase in business taxes 
A) an increase in income 
B) a decrease in the interest rate 
C) an increase in the interest rate 
D) more pessimistic business expectations 
E) an increase in business taxes

Question 2

The slope of the consumption function equals the

Accepted Answer

A) MPC 
B) MPS 
C) APC 
D) APS 
E) ratio of the APC to the APS (i.e.,APC divided by APS) 
A) MPC 
B) MPS 
C) APC 
D) APS 
E) ratio of the APC to the APS (i.e.,APC divided by APS)

Question 3

If income increases by $100 and the MPC is 3/4 (0.75),then consumption increases by

Accepted Answer

A) $25 
B) $66.66 
C) $50 
D) $33.33 
E) $75 
A) $25 
B) $66.66 
C) $50 
D) $33.33 
E) $75

Question 4

Net wealth is a __________ variable.Consumption and income are __________ variables.

Accepted Answer

A) stock,flow 
B) stock,stock 
C) stock,flat 
D) flow,stock 
E) flow,flow 
A) stock,flow 
B) stock,stock 
C) stock,flat 
D) flow,stock 
E) flow,flow

Question 5

Purchases of existing commodities,such as gold and precious gems,are considered investment spending by economists.

Accepted Answer

A) True 
 B)False

Question 6

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.

Question 7

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 8

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

Accepted Answer

A) True 
 B)False

Question 9

The primary determinant of saving is the interest rate.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Exhibit 9-3  
-In Exhibit 9-3,the MPC is equal to

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 12

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 13

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 14

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 15

A decrease in the price level decreases net wealth and increases consumption spending.

Accepted Answer

A) True 
 B)False

Question 16

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 17

If disposable income increases,consumption spending increases and saving decreases.

Accepted Answer

A) True 
 B)False

Question 18

Exhibit 9-3  
-In Exhibit 9-3,the MPS is equal to

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 19

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 20

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

Exam 9: Aaggregate Expenditure and Aggregate Demand

An upward shift of the investment function (i.e.,the one that relates investment spending to income)could be caused by

The slope of the consumption function equals the

If income increases by $100 and the MPC is 3/4 (0.75),then consumption increases by

Net wealth is a __________ variable.Consumption and income are __________ variables.

Purchases of existing commodities,such as gold and precious gems,are considered investment spending by economists.

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

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

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

The primary determinant of saving is the interest rate.

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

Exhibit 9-3 -In Exhibit 9-3,the MPC is equal to

A household's net wealth is the value of

As disposable income increases,consumption spending

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

A decrease in the price level decreases net wealth and increases consumption spending.

The consumption function relates consumption spending to

If disposable income increases,consumption spending increases and saving decreases.

Exhibit 9-3 -In Exhibit 9-3,the MPS is equal to

A decrease in the price level will

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

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Baggregate 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

Externalities and the Environment

International Finance

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

Filters

Net wealth is a variable.Consumption and income are variables.