Question 1

If the marginal propensity to save (MPS)= 0.1,then

Accepted Answer

A) the MPC = 0.9. 
B) the APS = 0.1. 
C) the APC = 0.9. 
D) consumption equals $1,800 when income equals $2,000. 
A) the MPC = 0.9. 
B) the APS = 0.1. 
C) the APC = 0.9. 
D) consumption equals $1,800 when income equals $2,000.

Question 2

-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 3

Along the portion of the consumption function that lies above the 45-degree line,saving is

Accepted Answer

A) positive. 
B) negative. 
C) equal to zero. 
D) equal to consumption 
A) positive. 
B) negative. 
C) equal to zero. 
D) equal to consumption

Question 4

-In the above figure,if real GDP is $1 trillion,there is

Accepted Answer

A) dissaving. 
B) positive saving. 
C) negative investment. 
D) negative consumption. 
A) dissaving. 
B) positive saving. 
C) negative investment. 
D) negative consumption.

Question 5

-In the above figure,the marginal propensity to consume (MPC)equals

Accepted Answer

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

Question 6

If real Gross Domestic Product (GDP)is at an equilibrium level in a closed economy,

Accepted Answer

A) C + I + G = real GDP. 
B) saving will be less than planned investment. 
C) unplanned inventory accumulation will equal planned inventory accumulation. 
D) C + T - G = real GDP. 
A) C + I + G = real GDP. 
B) saving will be less than planned investment. 
C) unplanned inventory accumulation will equal planned inventory accumulation. 
D) C + T - G = real GDP.

Question 7

-The above figure shows a consumption function and a 45-degree line.Real consumption is a function of disposable income.Why is real GDP used here instead? What is measured along the vertical axis? What is measured by point B? Explain the significance of point A.

Accepted Answer

Real disposable income is less than real

Question 8

-Refer to the above figure.Line EBD is called

Accepted Answer

A) the 45-degree line. 
B) the consumption function. 
C) the saving function. 
D) aggregate demand. 
A) the 45-degree line. 
B) the consumption function. 
C) the saving function. 
D) aggregate demand.

Question 9

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 10

Changes in real planned investment spending have

Accepted Answer

A) a direct relationship to changes in interest rates. 
B) an inverse relationship to changes in the interest rate. 
C) no identifiable relationship to changes in the interest rate. 
D) a direct relationship to changes in the level of household savings. 
A) a direct relationship to changes in interest rates. 
B) an inverse relationship to changes in the interest rate. 
C) no identifiable relationship to changes in the interest rate. 
D) a direct relationship to changes in the level of household savings.

Question 11

-Refer to the above figure.Autonomous consumption is

Accepted Answer

A) only at point A. 
B) to the left of point B. 
C) only at point B. 
D) to the right of point B. 
A) only at point A. 
B) to the left of point B. 
C) only at point B. 
D) to the right of point B.

Question 12

Which of the following is considered investment?

Accepted Answer

A) Maina purchases a new car for commuting to and from work. 
B) Jane purchases a new car for commuting to and from school. 
C) Johnny buys a new car for his wife as an anniversary gift. 
D) James purchases a new car to replace an old car in his cab business. 
A) Maina purchases a new car for commuting to and from work. 
B) Jane purchases a new car for commuting to and from school. 
C) Johnny buys a new car for his wife as an anniversary gift. 
D) James purchases a new car to replace an old car in his cab business.

Question 13

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

Accepted Answer

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

Question 14

If consumption is $750 when real disposable income is $1,000,the average propensity to consume is

Accepted Answer

A) 0.80. 
B) 0.75. 
C) 0.50. 
D) 0.25. 
A) 0.80. 
B) 0.75. 
C) 0.50. 
D) 0.25.

Question 15

Which of the following is NOT a simplifying assumption in the simple Keynesian model?

Accepted Answer

A) Net investment and gross investment are equal. 
B) All profits are distributed to the business owners. 
C) Real disposable income equals government purchases of goods and services. 
D) There is no foreign trade. 
A) Net investment and gross investment are equal. 
B) All profits are distributed to the business owners. 
C) Real disposable income equals government purchases of goods and services. 
D) There is no foreign trade.

Question 16

Fixed investment is

Accepted Answer

A) when a firm adds to its inventories of goods. 
B) when a firm accumulates profits. 
C) dissavings. 
D) an expenditure by firms on new machines that are expected to produce income in the future. 
A) when a firm adds to its inventories of goods. 
B) when a firm accumulates profits. 
C) dissavings. 
D) an expenditure by firms on new machines that are expected to produce income in the future.

Question 17

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 18

Which of the following is NOT included in the flow of investment spending that is part of total planned expenditures in the economy?

Accepted Answer

A) Purchases of corporate stock 
B) Spending on capital goods 
C) Inventory investment 
D) Fixed investment 
A) Purchases of corporate stock 
B) Spending on capital goods 
C) Inventory investment 
D) Fixed investment

Question 19

-In the above figure,what is the equilibrium level of real consumption spending?

Accepted Answer

A) $0.0 trillion 
B) $1.0 trillion 
C) $2.0 trillion 
D) $3.0 trillion 
A) $0.0 trillion 
B) $1.0 trillion 
C) $2.0 trillion 
D) $3.0 trillion

Question 20

Saving equals

Accepted Answer

A) disposable income minus taxes. 
B) disposable income minus consumption spending. 
C) disposable income minus savings. 
D) consumption spending minus savings. 
A) disposable income minus taxes. 
B) disposable income minus consumption spending. 
C) disposable income minus savings. 
D) consumption spending minus savings.

If the marginal propensity to save (MPS)= 0.1,then

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

Along the portion of the consumption function that lies above the 45-degree line,saving is

-In the above figure,if real GDP is $1 trillion,there is

-In the above figure,the marginal propensity to consume (MPC)equals

If real Gross Domestic Product (GDP)is at an equilibrium level in a closed economy,

-The above figure shows a consumption function and a 45-degree line.Real consumption is a function of disposable income.Why is real GDP used here instead? What is measured along the vertical axis? What is measured by point B? Explain the significance of point A.

-Refer to the above figure.Line EBD is called

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?

Changes in real planned investment spending have

-Refer to the above figure.Autonomous consumption is

Which of the following is considered investment?

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

If consumption is $750 when real disposable income is $1,000,the average propensity to consume is

Which of the following is NOT a simplifying assumption in the simple Keynesian model?

Fixed investment is

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

Which of the following is NOT included in the flow of investment spending that is part of total planned expenditures in the economy?

-In the above figure,what is the equilibrium level of real consumption spending?

Saving equals

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

Exam 12: Consumption, real GDP, and the Multiplier

If the marginal propensity to save (MPS)= 0.1,then

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

Along the portion of the consumption function that lies above the 45-degree line,saving is

-In the above figure,if real GDP is $1 trillion,there is

-In the above figure,the marginal propensity to consume (MPC)equals

If real Gross Domestic Product (GDP)is at an equilibrium level in a closed economy,

-The above figure shows a consumption function and a 45-degree line.Real consumption is a function of disposable income.Why is real GDP used here instead? What is measured along the vertical axis? What is measured by point B? Explain the significance of point A.

-Refer to the above figure.Line EBD is called

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?

Changes in real planned investment spending have

-Refer to the above figure.Autonomous consumption is

Which of the following is considered investment?

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

If consumption is $750 when real disposable income is $1,000,the average propensity to consume is

Which of the following is NOT a simplifying assumption in the simple Keynesian model?

Fixed investment is

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

Which of the following is NOT included in the flow of investment spending that is part of total planned expenditures in the economy?

-In the above figure,what is the equilibrium level of real consumption spending?

Saving equals

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