Question 1

One of the primary determinants of planned real investment spending is the

Accepted Answer

A)  firm expectation of future business profits. 
B)  rate of real consumption spending. 
C)  rate of real government spending. 
D)  rate of real saving. 
A)  firm expectation of future business profits. 
B)  rate of real consumption spending. 
C)  rate of real government spending. 
D)  rate of real saving.

Question 2

Planned expenditures equal real disposable income

Accepted Answer

A)  at every point on the consumption function. 
B)  at every point on the saving function. 
C)  at every point on the 45-degree line. 
D)  when saving equals zero. 
A)  at every point on the consumption function. 
B)  at every point on the saving function. 
C)  at every point on the 45-degree line. 
D)  when saving equals zero.

Question 3

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

Accepted Answer

A)  autonomous consumption. 
B)  saving. 
C)  dissaving. 
D)  zero saving. 
A)  autonomous consumption. 
B)  saving. 
C)  dissaving. 
D)  zero saving.

Question 4

When you purchase a new Samsung smartphone

Accepted Answer

A)  you are buying consumption goods. 
B)  you are buying capital goods. 
C)  you are consuming intermediate goods. 
D)  you are buying physical capital. 
A)  you are buying consumption goods. 
B)  you are buying capital goods. 
C)  you are consuming intermediate goods. 
D)  you are buying physical capital.

Question 5

If society wants aggregate demand to increase without changes in the price level, then there must be

Accepted Answer

A)  a gap between full employment and the current level of real GDP and an increase in autonomous spending. 
B)  an increase in autonomous spending combined with an increase in the marginal propensity to save. 
C)  an increase in autonomous saving so that autonomous investment spending can increase. 
D)  an increase in autonomous spending and a horizontal short-run aggregate supply curve. 
A)  a gap between full employment and the current level of real GDP and an increase in autonomous spending. 
B)  an increase in autonomous spending combined with an increase in the marginal propensity to save. 
C)  an increase in autonomous saving so that autonomous investment spending can increase. 
D)  an increase in autonomous spending and a horizontal short-run aggregate supply curve.

Question 6

A permanent reduction in net exports leads to

Accepted Answer

A)  a more than proportional decrease in real Gross Domestic Product (GDP). 
B)  a less than proportional decrease in real Gross Domestic Product (GDP). 
C)  a proportional increase in real Gross Domestic Product (GDP). 
D)  a reduction in taxes, autonomous government spending, and a fall in real Gross Domestic Product (GDP). 
A)  a more than proportional decrease in real Gross Domestic Product (GDP). 
B)  a less than proportional decrease in real Gross Domestic Product (GDP). 
C)  a proportional increase in real Gross Domestic Product (GDP). 
D)  a reduction in taxes, autonomous government spending, and a fall in real Gross Domestic Product (GDP).

Question 7

If the average propensity to consume is initially 0.8, the marginal propensity to consume is 0.75, and real disposable income increases by $1000, the value of saving

Accepted Answer

A)  increases by $200. 
B)  increases by $250. 
C)  decreases by $250. 
D)  decreases by $200. 
A)  increases by $200. 
B)  increases by $250. 
C)  decreases by $250. 
D)  decreases by $200.

Question 8

-Use the above table. The autonomous consumption in this table is

Accepted Answer

A)  $140. 
B)  $20. 
C)  $0. 
D)  $50. 
A)  $140. 
B)  $20. 
C)  $0. 
D)  $50.

Question 9

-According to the above table, the value of MPS is

Accepted Answer

A)  0.9. 
B)  0.2. 
C)  0.1. 
D)  increasing as real disposable income rises. 
A)  0.9. 
B)  0.2. 
C)  0.1. 
D)  increasing as real disposable income rises.

Question 10

-Use the above table. When real disposable income is $125

Accepted Answer

A)  APC = 0.96. 
B)  APC = 0.80. 
C)  APS = 0.20. 
D)  MPS = 0.96. 
A)  APC = 0.96. 
B)  APC = 0.80. 
C)  APS = 0.20. 
D)  MPS = 0.96.

Question 11

A lump-sum tax, such as a $1000 tax that every family must pay one time, is

Accepted Answer

A)  a type of income tax. 
B)  an autonomous tax. 
C)  negatively related to real GDP. 
D)  a regressive tax. 
A)  a type of income tax. 
B)  an autonomous tax. 
C)  negatively related to real GDP. 
D)  a regressive tax.

Question 12

-Refer to the above figure. If real disposable income is less than $5,000, then saving is

Accepted Answer

A)  0. 
B)  negative. 
C)  positive. 
D)  none of the above: cannot be determined with the given information. 
A)  0. 
B)  negative. 
C)  positive. 
D)  none of the above: cannot be determined with the given information.

Question 13

Suppose that when disposable income increases by $2,000, consumption spending increases by $1,800. Given this information, we know that the marginal propensity to consume (MPS) is

Accepted Answer

A)  0.1. 
B)  0.2. 
C)  0.8. 
D)  0.9. 
A)  0.1. 
B)  0.2. 
C)  0.8. 
D)  0.9.

Question 14

Suppose there is a $20 million increase in government spending. We know that this increase in government spending will cause which of the following to occur?

Accepted Answer

A)  an increase in equilibrium real GDP and an increase in the multiplier. 
B)  an increase in equilibrium real GDP and a reduction in the multiplier. 
C)  an increase in equilibrium real GDP and no change in the multiplier. 
D)  equilibrium real GDP will increase by exactly $20 million. 
A)  an increase in equilibrium real GDP and an increase in the multiplier. 
B)  an increase in equilibrium real GDP and a reduction in the multiplier. 
C)  an increase in equilibrium real GDP and no change in the multiplier. 
D)  equilibrium real GDP will increase by exactly $20 million.

Question 15

-In the above table, the marginal propensity to consume (MPC) is

Accepted Answer

A)  0.9. 
B)  0.75. 
C)  0.8. 
D)  0.85. 
A)  0.9. 
B)  0.75. 
C)  0.8. 
D)  0.85.

Question 16

If the aggregate supply curve is upward sloping, then an increase in autonomous consumption leads to a(n)

Accepted Answer

A)  increase in aggregate demand and a rise in the price level. 
B)  decrease in aggregate demand and a rise in the price level. 
C)  decrease in aggregate demand and a fall in the price level. 
D)  no change in aggregate demand and no change in the price level. 
A)  increase in aggregate demand and a rise in the price level. 
B)  decrease in aggregate demand and a rise in the price level. 
C)  decrease in aggregate demand and a fall in the price level. 
D)  no change in aggregate demand and no change in the price level.

Question 17

-Refer to the above figure. Which variable is autonomous with respect to real GDP?

Accepted Answer

A)  real saving 
B)  real investment spending 
C)  real consumption spending 
D)  the sum of real consumption and real saving 
A)  real saving 
B)  real investment spending 
C)  real consumption spending 
D)  the sum of real consumption and real saving

Question 18

If saving equals $100 when real disposable income equals $1,000, the break-even income is

Accepted Answer

A)  less than $1,000. 
B)  greater than $1,000. 
C)  equal to $1,000. 
D)  cannot be determined using the above information. 
A)  less than $1,000. 
B)  greater than $1,000. 
C)  equal to $1,000. 
D)  cannot be determined using the above information.

Question 19

When real planned saving is greater than real planned investment spending

Accepted Answer

A)  the interest rate will increase. 
B)  the interest rate will decrease. 
C)  real GDP will increase. 
D)  real GDP will decrease. 
A)  the interest rate will increase. 
B)  the interest rate will decrease. 
C)  real GDP will increase. 
D)  real GDP will decrease.

Question 20

According to the above figure, the average propensity to save (APS) is zero at point

Accepted Answer

A)  D. 
B)  F. 
C)  I. 
D)  J. 
A)  D. 
B)  F. 
C)  I. 
D)  J.

Exam 12: Consumption, Real GDP, and the Multiplier

One of the primary determinants of planned real investment spending is the

Planned expenditures equal real disposable income

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

When you purchase a new Samsung smartphone

If society wants aggregate demand to increase without changes in the price level, then there must be

A permanent reduction in net exports leads to

If the average propensity to consume is initially 0.8, the marginal propensity to consume is 0.75, and real disposable income increases by $1000, the value of saving

-Use the above table. The autonomous consumption in this table is

-According to the above table, the value of MPS is

-Use the above table. When real disposable income is $125

A lump-sum tax, such as a $1000 tax that every family must pay one time, is

-Refer to the above figure. If real disposable income is less than $5,000, then saving is

Suppose that when disposable income increases by $2,000, consumption spending increases by $1,800. Given this information, we know that the marginal propensity to consume (MPS) is

Suppose there is a $20 million increase in government spending. We know that this increase in government spending will cause which of the following to occur?

-In the above table, the marginal propensity to consume (MPC) is

If the aggregate supply curve is upward sloping, then an increase in autonomous consumption leads to a(n)

-Refer to the above figure. Which variable is autonomous with respect to real GDP?

If saving equals $100 when real disposable income equals $1,000, the break-even income is

When real planned saving is greater than real planned investment spending

According to the above figure, the average propensity to save (APS) is zero at point

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

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