Question 1

If the MPC is 0.75, then the MPS is

Accepted Answer

A)  0.25. 
B)  1.39. 
C)  1.25. 
D)  cannot be determined without more information. 
A)  0.25. 
B)  1.39. 
C)  1.25. 
D)  cannot be determined without more information.

Question 2

-In the above figure, at the equilibrium level of real GDP, there is

Accepted Answer

A)  positive saving. 
B)  negative saving. 
C)  zero saving. 
D)  a negative tax rate. 
A)  positive saving. 
B)  negative saving. 
C)  zero saving. 
D)  a negative tax rate.

Question 3

Along the 45° reference line

Accepted Answer

A)  consumption expenditures equal saving. 
B)  the relationship between consumption and income is represented. 
C)  the average propensity to consume is represented. 
D)  planned real expenditures equal real disposable income. 
A)  consumption expenditures equal saving. 
B)  the relationship between consumption and income is represented. 
C)  the average propensity to consume is represented. 
D)  planned real expenditures equal real disposable income.

Question 4

Note: Amounts in $ trillions
-Refer to the above table. Which variables in the table are NOT autonomous?

Accepted Answer

A)  taxes, government spending, and saving 
B)  planned investment, net exports, and government spending 
C)  planned consumption and planned saving 
D)  planned saving only 
A)  taxes, government spending, and saving 
B)  planned investment, net exports, and government spending 
C)  planned consumption and planned saving 
D)  planned saving only

Question 5

When the average propensity to save (APS) is 0.25, then this means

Accepted Answer

A)  people are spending 25 percent of their disposable income. 
B)  people are spending 75 percent of their disposable income. 
C)  people are saving $0.25 of the last dollar earned. 
D)  people are spending 40 percent of their disposable income and investing the remaining 60 percent. 
A)  people are spending 25 percent of their disposable income. 
B)  people are spending 75 percent of their disposable income. 
C)  people are saving $0.25 of the last dollar earned. 
D)  people are spending 40 percent of their disposable income and investing the remaining 60 percent.

Question 6

-Refer to the above figure. The figure represents the consumption function for a consumer. Point A represents

Accepted Answer

A)  autonomous consumption. 
B)  positive saving. 
C)  negative consumption. 
D)  zero saving. 
A)  autonomous consumption. 
B)  positive saving. 
C)  negative consumption. 
D)  zero saving.

Question 7

Ignoring the government and foreign sectors, equilibrium real Gross Domestic Product (GDP) is determined by

Accepted Answer

A)  the intersection of the planned saving and planned investment schedules. 
B)  the intersection of the planned saving and planned consumption schedules. 
C)  the intersection of the consumption function with the 45-degree line. 
D)  finding the real Gross Domestic Product (GDP) for which real savings are zero. 
A)  the intersection of the planned saving and planned investment schedules. 
B)  the intersection of the planned saving and planned consumption schedules. 
C)  the intersection of the consumption function with the 45-degree line. 
D)  finding the real Gross Domestic Product (GDP) for which real savings are zero.

Question 8

The consumption function shows

Accepted Answer

A)  a positive relationship between an individual's stock of wealth and his level of planned consumption. 
B)  a positive relationship between disposable income and planned consumption. 
C)  a negative relationship between planned consumption and aggregate saving. 
D)  a negative relationship between disposable income and planned consumption. 
A)  a positive relationship between an individual's stock of wealth and his level of planned consumption. 
B)  a positive relationship between disposable income and planned consumption. 
C)  a negative relationship between planned consumption and aggregate saving. 
D)  a negative relationship between disposable income and planned consumption.

Question 9

Distinguish between saving and savings. How does investment relate to this distinction, if at all?

Accepted Answer

Saving is a flow concept and savings is

Question 10

If consumption is $650 when real disposable income is $1,000, the average propensity to consume is

Accepted Answer

A)  0.80. 
B)  0.65. 
C)  0.065. 
D)  0.08. 
A)  0.80. 
B)  0.65. 
C)  0.065. 
D)  0.08.

Question 11

-Use the above table. At an income of $150

Accepted Answer

A)  real saving is $20. 
B)  real dissaving is $10. 
C)  real saving is $10. 
D)  real dissaving is $50. 
A)  real saving is $20. 
B)  real dissaving is $10. 
C)  real saving is $10. 
D)  real dissaving is $50.

Question 12

-In the above table, the average propensity to consume when income is $9,000 is

Accepted Answer

A)  0.9. 
B)  0.1. 
C)  0.0. 
D)  0.8. 
A)  0.9. 
B)  0.1. 
C)  0.0. 
D)  0.8.

Question 13

The consumption function shows how much

Accepted Answer

A)  households plan to consume per year at each level of real disposable income. 
B)  households plan to consume per year at each possible interest rate. 
C)  real disposable income people will earn at each income tax bracket. 
D)  households plan to consume per year at each level of savings. 
A)  households plan to consume per year at each level of real disposable income. 
B)  households plan to consume per year at each possible interest rate. 
C)  real disposable income people will earn at each income tax bracket. 
D)  households plan to consume per year at each level of savings.

Question 14

If, at some level of output, total planned real expenditures are greater than real Gross Domestic Product (GDP)

Accepted Answer

A)  real GDP will fall. 
B)  real GDP remains unchanged. 
C)  real GDP will either fall or remain unchanged, depending on the MPC. 
D)  unplanned inventories will decrease. 
A)  real GDP will fall. 
B)  real GDP remains unchanged. 
C)  real GDP will either fall or remain unchanged, depending on the MPC. 
D)  unplanned inventories will decrease.

Question 15

If the multiplier has a value of 1, then the value of the marginal propensity to save (MPS) is

Accepted Answer

A)  1.00. 
B)  0. 
C)  10.00. 
D)  0.10. 
A)  1.00. 
B)  0. 
C)  10.00. 
D)  0.10.

Question 16

Average propensity to consume (APC) equals

Accepted Answer

A)  change in planned consumption divided by change in real disposable income. 
B)  planned consumption divided by real disposable income. 
C)  real disposable income divided by planned consumption. 
D)  change in real disposable income divided by change in planned consumption. 
A)  change in planned consumption divided by change in real disposable income. 
B)  planned consumption divided by real disposable income. 
C)  real disposable income divided by planned consumption. 
D)  change in real disposable income divided by change in planned consumption.

Question 17

The slope of the consumption function is the

Accepted Answer

A)  MPC. 
B)  APC. 
C)  APS. 
D)  MPS. 
A)  MPC. 
B)  APC. 
C)  APS. 
D)  MPS.

Question 18

According to Keynesian theory, the most important determinant of saving and consumption is

Accepted Answer

A)  the level of real disposable income. 
B)  the stock of liquid assets. 
C)  the returns on stocks and bonds 
D)  the level of consumer indebtedness. 
A)  the level of real disposable income. 
B)  the stock of liquid assets. 
C)  the returns on stocks and bonds 
D)  the level of consumer indebtedness.

Question 19

If we observe that interest rates rise but real investment spending still increases, what must have happened to the function relating investment to the interest rate?

Accepted Answer

A)  It shifted to the right. 
B)  It shifted to the left. 
C)  There was a movement up the function relating investment to the interest rate. 
D)  There was a movement down the function relating investment to the interest rate. 
A)  It shifted to the right. 
B)  It shifted to the left. 
C)  There was a movement up the function relating investment to the interest rate. 
D)  There was a movement down the function relating investment to the interest rate.

Question 20

The life-cycle theory of consumption predicts that when Jason anticipates a higher income in the future, then Jason will

Accepted Answer

A)  consume more and save less in the current period. 
B)  consume less and save more in the current period. 
C)  consume less and save less in the current period. 
D)  not change the amount of consumption or saving in the current period. 
A)  consume more and save less in the current period. 
B)  consume less and save more in the current period. 
C)  consume less and save less in the current period. 
D)  not change the amount of consumption or saving in the current period.

Exam 12: Consumption, Real GDP, and the Multiplier

If the MPC is 0.75, then the MPS is

-In the above figure, at the equilibrium level of real GDP, there is

Along the 45° reference line

Note: Amounts in $ trillions -Refer to the above table. Which variables in the table are NOT autonomous?

When the average propensity to save (APS) is 0.25, then this means

-Refer to the above figure. The figure represents the consumption function for a consumer. Point A represents

Ignoring the government and foreign sectors, equilibrium real Gross Domestic Product (GDP) is determined by

The consumption function shows

Distinguish between saving and savings. How does investment relate to this distinction, if at all?

If consumption is $650 when real disposable income is $1,000, the average propensity to consume is

-Use the above table. At an income of $150

-In the above table, the average propensity to consume when income is $9,000 is

The consumption function shows how much

If, at some level of output, total planned real expenditures are greater than real Gross Domestic Product (GDP)

If the multiplier has a value of 1, then the value of the marginal propensity to save (MPS) is

Average propensity to consume (APC) equals

The slope of the consumption function is the

According to Keynesian theory, the most important determinant of saving and consumption is

If we observe that interest rates rise but real investment spending still increases, what must have happened to the function relating investment to the interest rate?

The life-cycle theory of consumption predicts that when Jason anticipates a higher income in the future, then Jason will

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters