Question 1

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 2

Exhibit 9-4  
-Consider an economy with a consumption function like C1 in Exhibit 9-4.The economy is currently operating at A when there is a decrease in real disposable income.This would produce a movement from A to

Accepted Answer

A) B 
B) D 
C) E 
D) F 
E) H 
A) B 
B) D 
C) E 
D) F 
E) H

Question 3

Net taxes are

Accepted Answer

A) taxes plus transfer payments 
B) taxes minus transfer payments 
C) an injection into the economic system 
D) consumption after taxes 
E) government spending minus taxes 
A) taxes plus transfer payments 
B) taxes minus transfer payments 
C) an injection into the economic system 
D) consumption after taxes 
E) government spending minus taxes

Question 4

The amount of U.S.exports purchased by the rest of the world is primarily determined by

Accepted Answer

A) real disposable income in the United States 
B) real disposable income in other nations 
C) the real interest rate in other nations 
D) the real interest rate in the United States 
E) the government budget deficits in other nations 
A) real disposable income in the United States 
B) real disposable income in other nations 
C) the real interest rate in other nations 
D) the real interest rate in the United States 
E) the government budget deficits in other nations

Question 5

A decrease in wealth will

Accepted Answer

A) shift the consumption function downward 
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 downward 
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 6

Suppose that when disposable income rises from $3 trillion to $3.2 trillion,consumption rises from $2.5 trillion to $2.6 trillion.What is the marginal propensity to save?

Accepted Answer

A) 0.1 
B) 0.2 
C) 0.5 
D) 0.8 
E) 0.9 
A) 0.1 
B) 0.2 
C) 0.5 
D) 0.8 
E) 0.9

Question 7

As domestic income rises,net exports

Accepted Answer

A) fall,since exports remain the same but imports increase 
B) rise,since exports remain the same but imports fall 
C) fall,since exports are lower and imports remain the same 
D) rise,since exports are higher and imports remain the same 
E) may either rise or fall,since exports and imports change in opposite directions 
A) fall,since exports remain the same but imports increase 
B) rise,since exports remain the same but imports fall 
C) fall,since exports are lower and imports remain the same 
D) rise,since exports are higher and imports remain the same 
E) may either rise or fall,since exports and imports change in opposite directions

Question 8

Fluctuations in consumption

Accepted Answer

A) are noticeably smaller during recessions than during expansions 
B) are roughly similar to fluctuations in investment 
C) are roughly similar to fluctuations in GDP 
D) are closely followed by economic forecasters because those fluctuations often signal that a recession will occur 
E) account for most of the variability in GDP 
A) are noticeably smaller during recessions than during expansions 
B) are roughly similar to fluctuations in investment 
C) are roughly similar to fluctuations in GDP 
D) are closely followed by economic forecasters because those fluctuations often signal that a recession will occur 
E) account for most of the variability in GDP

Question 9

A grocery store manager must decide whether to buy four rug cleaners to rent to customers.The manager estimates that the first would yield $200 a year,the second $150,the third $75,and the fourth $20.If the interest rate is 12 percent and each rug cleaner costs $500,how many should the manager buy?

Accepted Answer

A) none 
B) one 
C) two 
D) three 
E) four 
A) none 
B) one 
C) two 
D) three 
E) four

Question 10

The partners in the Wonderwords word processing firm spend $12,000 on computers,hoping to earn an additional $1,000 per year with them.If the partners could earn 7 percent interest on a bank deposit they should

Accepted Answer

A) put the $12,000 in the bank 
B) put $6,000 in the bank and spend only $6,000 on computers 
C) buy the computers because the rate of return on the computers is positive 
D) buy the computers only if they do not have to borrow the funds to buy the computers 
E) buy the computers because the rate of return on the computers exceeds 7 percent 
A) put the $12,000 in the bank 
B) put $6,000 in the bank and spend only $6,000 on computers 
C) buy the computers because the rate of return on the computers is positive 
D) buy the computers only if they do not have to borrow the funds to buy the computers 
E) buy the computers because the rate of return on the computers exceeds 7 percent

Question 11

Suppose that autonomous investment level is $100 billion per year.If income in the economy falls,

Accepted Answer

A) the level of investment will increase 
B) the level of investment will decrease 
C) the quantity of investment demanded will increase 
D) the quantity of investment demanded will decrease 
E) investment spending will not change 
A) the level of investment will increase 
B) the level of investment will decrease 
C) the quantity of investment demanded will increase 
D) the quantity of investment demanded will decrease 
E) investment spending will not change

Question 12

Net exports are

Accepted Answer

A) the value of goods produced in the domestic economy but sold in other countries 
B) the value of goods produced in other countries but purchased domestically 
C) the largest component of aggregate expenditure 
D) the value of imports minus the value of exports 
E) the value of exports minus the value of imports 
A) the value of goods produced in the domestic economy but sold in other countries 
B) the value of goods produced in other countries but purchased domestically 
C) the largest component of aggregate expenditure 
D) the value of imports minus the value of exports 
E) the value of exports minus the value of imports

Question 13

If a household's income rises from $46,000 to $46,700 and its consumption spending rises from $35,800 to $36,400,then its

Accepted Answer

A) marginal propensity to consume is 0.86 
B) marginal propensity to consume is 0.99 
C) marginal propensity to consume is 0.98 
D) marginal propensity to save is 0.01 
E) marginal propensity to save is 0.86 
A) marginal propensity to consume is 0.86 
B) marginal propensity to consume is 0.99 
C) marginal propensity to consume is 0.98 
D) marginal propensity to save is 0.01 
E) marginal propensity to save is 0.86

Question 14

Dennis spends $400 on a snowblower,expecting to earn $80 per year for each of the next five years clearing out his neighbors' driveways.The rate of return he expects on this investment is

Accepted Answer

A) 500 percent per year 
B) 100 percent per year 
C) 80 percent per year 
D) 25 percent per year 
E) 20 percent per year 
A) 500 percent per year 
B) 100 percent per year 
C) 80 percent per year 
D) 25 percent per year 
E) 20 percent per year

Question 15

Expectations that disposable income will decrease in the future will

Accepted Answer

A) shift the current consumption function upward 
B) shift the current consumption function downward 
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) shift the current consumption function downward 
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 16

Which of the following best represents the opportunity cost of investing in capital?

Accepted Answer

A) the actual revenue stream generated by the investment 
B) the expected revenue stream generated by the investment 
C) the profit that investment is expected to generate 
D) the market interest rate 
E) the purchase price of the plant and equipment 
A) the actual revenue stream generated by the investment 
B) the expected revenue stream generated by the investment 
C) the profit that investment is expected to generate 
D) the market interest rate 
E) the purchase price of the plant and equipment

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

If the MPC < 1 and a household's disposable income increases by $2,000,the household's consumption will

Accepted Answer

A) increase by less than $2,000 
B) increase by $2,000 
C) decrease if the family was wealthy before the income change 
D) remain the same unless the change in income significantly affects the household's wealth 
E) remain the same 
A) increase by less than $2,000 
B) increase by $2,000 
C) decrease if the family was wealthy before the income change 
D) remain the same unless the change in income significantly affects the household's wealth 
E) remain the same

Question 19

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 20

Economists assume that the fundamental motive of investors is

Accepted Answer

A) to maximize profit 
B) to maximize income 
C) to maximize the firm's growth 
D) to promote economic growth for the economy as a whole 
E) the desire to save 
A) to maximize profit 
B) to maximize income 
C) to maximize the firm's growth 
D) to promote economic growth for the economy as a whole 
E) the desire to save

Exam 9: Aaggregate Expenditure and Aggregate Demand

An increase in real disposable income will

Exhibit 9-4 -Consider an economy with a consumption function like C1 in Exhibit 9-4.The economy is currently operating at A when there is a decrease in real disposable income.This would produce a movement from A to

Net taxes are

The amount of U.S.exports purchased by the rest of the world is primarily determined by

A decrease in wealth will

Suppose that when disposable income rises from $3 trillion to $3.2 trillion,consumption rises from $2.5 trillion to $2.6 trillion.What is the marginal propensity to save?

As domestic income rises,net exports

Fluctuations in consumption

A grocery store manager must decide whether to buy four rug cleaners to rent to customers.The manager estimates that the first would yield $200 a year,the second $150,the third $75,and the fourth $20.If the interest rate is 12 percent and each rug cleaner costs $500,how many should the manager buy?

The partners in the Wonderwords word processing firm spend $12,000 on computers,hoping to earn an additional $1,000 per year with them.If the partners could earn 7 percent interest on a bank deposit they should

Suppose that autonomous investment level is $100 billion per year.If income in the economy falls,

Net exports are

If a household's income rises from $46,000 to $46,700 and its consumption spending rises from $35,800 to $36,400,then its

Dennis spends $400 on a snowblower,expecting to earn $80 per year for each of the next five years clearing out his neighbors' driveways.The rate of return he expects on this investment is

Expectations that disposable income will decrease in the future will

Which of the following best represents the opportunity cost of investing in capital?

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

If the MPC < 1 and a household's disposable income increases by $2,000,the household's consumption will

Which of the following would shift the consumption function upward?

Economists assume that the fundamental motive of investors is

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

Exhibit 9-4 -Consider an economy with a consumption function like C₁ in Exhibit 9-4.The economy is currently operating at A when there is a decrease in real disposable income.This would produce a movement from A to