Question 1

Explain how the aggregate demand curve is related to the C + I + G + X curve.

Accepted Answer

The C + I + G + X curve determines equilibrium real Gross Domestic Product (GDP)for a given price level.If the price level rises,people reduce consumption at every level of Gross Domestic Product (GDP)because their money balances are less valuable,investment spending falls because interest rates increase,and net exports fall because domestic goods are relatively more expensive.Hence,the C + I + G + X curve shifts down,generating a lower real Gross Domestic Product (GDP).We have two price levels and two equilibrium levels of real Gross Domestic Product (GDP)and can derive the downward sloping aggregate demand curve.

Question 2

In the Keynesian model,an increase in real autonomous spending results in a greater increase in real Gross Domestic Product (GDP)if

Accepted Answer

A) the marginal propensity to consume (MP
C) is lower. 
B) the marginal propensity to consume (MP
C) is higher. 
C) the average propensity to save (APS)is higher. 
D) the average propensity to save (APS)is lower. 
A) the marginal propensity to consume (MP
C) is lower. 
B) the marginal propensity to consume (MP
C) is higher. 
C) the average propensity to save (APS)is higher. 
D) the average propensity to save (APS)is lower. B

Question 3

All of the following are flow variables EXCEPT

Accepted Answer

A) consumption. 
B) saving. 
C) investment. 
D) capital goods. 
A) consumption. 
B) saving. 
C) investment. 
D) capital goods. D

Question 4

For a closed economy with no government,we know that at every level of GDP actual investment equals

Accepted Answer

A) planned investment. 
B) planned saving. 
C) the difference between planned saving and actual saving. 
D) the difference between planned investment and actual saving. 
A) planned investment. 
B) planned saving. 
C) the difference between planned saving and actual saving. 
D) the difference between planned investment and actual saving.

Question 5

The average propensity to consume is

Accepted Answer

A) real consumption/real disposable income. 
B) real saving/real disposable income. 
C) change in real consumption/change in real disposable income. 
D) change in real saving/change in real disposable income. 
A) real consumption/real disposable income. 
B) real saving/real disposable income. 
C) change in real consumption/change in real disposable income. 
D) change in real saving/change in real disposable income.

Question 6

The slope of the saving function is the

Accepted Answer

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

Question 7

When graphing the consumption function,we include a 45-degree reference line.What is true at the points at which the consumption function crosses this line?

Accepted Answer

A) Planned real saving is zero. 
B) Planned real consumption spending is zero. 
C) Real disposable income is zero. 
D) Real GDP is zero. 
A) Planned real saving is zero. 
B) Planned real consumption spending is zero. 
C) Real disposable income is zero. 
D) Real GDP is zero.

Question 8

If firms' unplanned inventories are increasing,then in a closed,private economy,

Accepted Answer

A) the level of real national income will rise. 
B) the level of real national income will not change in the foreseeable future. 
C) actual consumption is greater than planned consumption. 
D) consumers are saving more than businesses anticipated. 
A) the level of real national income will rise. 
B) the level of real national income will not change in the foreseeable future. 
C) actual consumption is greater than planned consumption. 
D) consumers are saving more than businesses anticipated.

Question 9

How does an increase in the price level affect the position of the C + I + G + X curve and in turn the equilibrium level of real GDP?

Accepted Answer

A) The C + I + G + X curve shifts down,thereby reducing the equilibrium level of real GDP. 
B) The C + I + G + X curve shifts down,thereby increasing the equilibrium level of real GDP. 
C) The C + I + G + X curve shifts up,thereby reducing the equilibrium level of real GDP. 
D) The C + I + G + X curve shifts up,thereby increasing the equilibrium level of real GDP. 
A) The C + I + G + X curve shifts down,thereby reducing the equilibrium level of real GDP. 
B) The C + I + G + X curve shifts down,thereby increasing the equilibrium level of real GDP. 
C) The C + I + G + X curve shifts up,thereby reducing the equilibrium level of real GDP. 
D) The C + I + G + X curve shifts up,thereby increasing the equilibrium level of real GDP.

Question 10

The consumption function is the relationship between

Accepted Answer

A) real consumption spending and real taxes. 
B) real consumption spending and investment spending. 
C) real consumption spending and real disposable income. 
D) real consumption spending and real saving. 
A) real consumption spending and real taxes. 
B) real consumption spending and investment spending. 
C) real consumption spending and real disposable income. 
D) real consumption spending and real saving.

Question 11

-Consider the above figure.At income level   = $30,the APC is equal to

Accepted Answer

A) 1.25. 
B) 1.67. 
C) 1.05. 
D) 0.05. 
A) 1.25. 
B) 1.67. 
C) 1.05. 
D) 0.05.

Question 12

If the marginal propensity to consume (MPC)is 0.8,the multiplier is

Accepted Answer

A) 5.0. 
B) 1.2. 
C) 0.2. 
D) 0.8. 
A) 5.0. 
B) 1.2. 
C) 0.2. 
D) 0.8.

Question 13

The marginal propensity to consume explains how much of the next dollar of disposable income

Accepted Answer

A) a household will spend. 
B) a business will invest. 
C) the government will spend. 
D) foreign residents will use to purchase domestic exports. 
A) a household will spend. 
B) a business will invest. 
C) the government will spend. 
D) foreign residents will use to purchase domestic exports.

Question 14

If your real disposable income goes up by $1,000 per week,and your real consumption spending goes up by $800 per week,you have an marginal propensity to save of

Accepted Answer

A) 0.2. 
B) 0.8. 
C) 1.2. 
D) 1.0. 
A) 0.2. 
B) 0.8. 
C) 1.2. 
D) 1.0.

Question 15

The arithmetic value of (1 - MPC)equals

Accepted Answer

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

Question 16

Suppose that aggregate demand increases along the upward sloping portion of the aggregate supply curve.What is the result?

Accepted Answer

A) Nominal GDP and real GDP decrease by the same amount. 
B) Nominal GDP and real GDP increase by the same amount. 
C) Nominal GDP increases more than real GDP increases. 
D) Real GDP increases more than nominal GDP increases. 
A) Nominal GDP and real GDP decrease by the same amount. 
B) Nominal GDP and real GDP increase by the same amount. 
C) Nominal GDP increases more than real GDP increases. 
D) Real GDP increases more than nominal GDP increases.

Question 17

-In the above figure,when disposable income is greater than 600,

Accepted Answer

A) saving is negative. 
B) the MPC is greater than 1. 
C) saving is positive. 
D) the MPS is negative. 
A) saving is negative. 
B) the MPC is greater than 1. 
C) saving is positive. 
D) the MPS is negative.

Question 18

When consumption spending is greater than disposable income,we know with certainty that we have

Accepted Answer

A) dissaving. 
B) excess thrift. 
C) positive savings. 
D) negative net investment. 
A) dissaving. 
B) excess thrift. 
C) positive savings. 
D) negative net investment.

Question 19

If the marginal propensity to consume (MPC)decreases,then

Accepted Answer

A) the marginal propensity to save (MPS)decreases. 
B) the multiplier decreases. 
C) the multiplier increases. 
D) MPC + MPS is less than 1. 
A) the marginal propensity to save (MPS)decreases. 
B) the multiplier decreases. 
C) the multiplier increases. 
D) MPC + MPS is less than 1.

Question 20

The consumption function shows the relationship between planned real consumption spending and

Accepted Answer

A) real disposable income. 
B) planned real saving. 
C) the average propensity to consume. 
D) the marginal propensity to consume. 
A) real disposable income. 
B) planned real saving. 
C) the average propensity to consume. 
D) the marginal propensity to consume.

Explain how the aggregate demand curve is related to the C + I + G + X curve.

In the Keynesian model,an increase in real autonomous spending results in a greater increase in real Gross Domestic Product (GDP)if

All of the following are flow variables EXCEPT

For a closed economy with no government,we know that at every level of GDP actual investment equals

The average propensity to consume is

The slope of the saving function is the

When graphing the consumption function,we include a 45-degree reference line.What is true at the points at which the consumption function crosses this line?

If firms' unplanned inventories are increasing,then in a closed,private economy,

How does an increase in the price level affect the position of the C + I + G + X curve and in turn the equilibrium level of real GDP?

The consumption function is the relationship between

-Consider the above figure.At income level = $30,the APC is equal to

If the marginal propensity to consume (MPC)is 0.8,the multiplier is

The marginal propensity to consume explains how much of the next dollar of disposable income

If your real disposable income goes up by $1,000 per week,and your real consumption spending goes up by $800 per week,you have an marginal propensity to save of

The arithmetic value of (1 - MPC)equals

Suppose that aggregate demand increases along the upward sloping portion of the aggregate supply curve.What is the result?

-In the above figure,when disposable income is greater than 600,

When consumption spending is greater than disposable income,we know with certainty that we have

If the marginal propensity to consume (MPC)decreases,then

The consumption function shows the relationship between planned real consumption spending and

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

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 12: Consumption, real GDP, and the Multiplier

Explain how the aggregate demand curve is related to the C + I + G + X curve.

In the Keynesian model,an increase in real autonomous spending results in a greater increase in real Gross Domestic Product (GDP)if

All of the following are flow variables EXCEPT

For a closed economy with no government,we know that at every level of GDP actual investment equals

The average propensity to consume is

The slope of the saving function is the

When graphing the consumption function,we include a 45-degree reference line.What is true at the points at which the consumption function crosses this line?

If firms' unplanned inventories are increasing,then in a closed,private economy,

How does an increase in the price level affect the position of the C + I + G + X curve and in turn the equilibrium level of real GDP?

The consumption function is the relationship between

-Consider the above figure.At income level = $30,the APC is equal to

If the marginal propensity to consume (MPC)is 0.8,the multiplier is

The marginal propensity to consume explains how much of the next dollar of disposable income

If your real disposable income goes up by $1,000 per week,and your real consumption spending goes up by $800 per week,you have an marginal propensity to save of

The arithmetic value of (1 - MPC)equals

Suppose that aggregate demand increases along the upward sloping portion of the aggregate supply curve.What is the result?

-In the above figure,when disposable income is greater than 600,

When consumption spending is greater than disposable income,we know with certainty that we have

If the marginal propensity to consume (MPC)decreases,then

The consumption function shows the relationship between planned real consumption spending and

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

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters