Question 1

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

Question 2

The consumption function will shift with

Accepted Answer

A) an increase in real disposable income. 
B) a change in saving. 
C) a decrease in real disposable income. 
D) a change in household wealth. 
A) an increase in real disposable income. 
B) a change in saving. 
C) a decrease in real disposable income. 
D) a change in household wealth.

Question 3

The stock of assets owned by a person,household,firm or nation is

Accepted Answer

A) real disposable income. 
B) wealth. 
C) capital investment. 
D) capital goods. 
A) real disposable income. 
B) wealth. 
C) capital investment. 
D) capital goods.

Question 4

Which of the following is true?

Accepted Answer

A) APC + MPS = 1 
B) MPC + MPS = 1 
C) 1 + APC = APS 
D) APC - APS = 1 
A) APC + MPS = 1 
B) MPC + MPS = 1 
C) 1 + APC = APS 
D) APC - APS = 1

Question 5

Which one of the following statements is true?

Accepted Answer

A) In the classical model,the supply of saving is determined by the rate of interest. 
B) In the classical model,the supply of saving is determined by the level of income. 
C) In the Keynesian model,the supply of saving is determined by the rate of interest. 
D) In the Keynesian model,the supply of saving is determined by the level of investment. 
A) In the classical model,the supply of saving is determined by the rate of interest. 
B) In the classical model,the supply of saving is determined by the level of income. 
C) In the Keynesian model,the supply of saving is determined by the rate of interest. 
D) In the Keynesian model,the supply of saving is determined by the level of investment.

Question 6

-Refer to the above table.The table gives the combinations of real disposable income and real consumption for a college student for a year.What is the value of the average propensity to save equal when real disposable income equals $14,000?

Accepted Answer

A) 0.09 
B) 0.7 
C) 0.91 
D) 1.1 
A) 0.09 
B) 0.7 
C) 0.91 
D) 1.1

Question 7

The multiplier effect applies to any

Accepted Answer

A) change in autonomous investment but not autonomous consumption. 
B) change in autonomous consumption but not autonomous investment. 
C) change in both autonomous consumption and autonomous investment. 
D) change in any source of spending other than consumption and investment. 
A) change in autonomous investment but not autonomous consumption. 
B) change in autonomous consumption but not autonomous investment. 
C) change in both autonomous consumption and autonomous investment. 
D) change in any source of spending other than consumption and investment.

Question 8

Suppose that the marginal propensity to save (MPS)equals 0.2.The value of the multiplier would be

Accepted Answer

A) .8. 
B) 1.25. 
C) 2. 
D) 5. 
A) .8. 
B) 1.25. 
C) 2. 
D) 5.

Question 9

If the MPC equals 0.75,then

Accepted Answer

A) for every $100 increase in consumption,real Gross Domestic Product (GDP)increases by $75. 
B) consumption is always more than real Gross Domestic Product (GDP). 
C) for every $100 increase in real Gross Domestic Product (GDP),saving increases by $75. 
D) for every $100 increase in real Gross Domestic Product (GDP),saving increases by $25. 
A) for every $100 increase in consumption,real Gross Domestic Product (GDP)increases by $75. 
B) consumption is always more than real Gross Domestic Product (GDP). 
C) for every $100 increase in real Gross Domestic Product (GDP),saving increases by $75. 
D) for every $100 increase in real Gross Domestic Product (GDP),saving increases by $25.

Question 10

If the average propensity to consume is initially 1.0,the marginal propensity to consume is 0.75,and real disposable income increases by $1000,the new value of saving is

Accepted Answer

A) 0. 
B) $250. 
C) $750. 
D) $1000. 
A) 0. 
B) $250. 
C) $750. 
D) $1000.

Question 11

-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.

Question 12

Suppose marginal propensity to consume (MPC)is 0.7 and there is a $1,000 increase in autonomous consumption.Given this information,real GDP will increase by

Accepted Answer

A) $3,333. 
B) $1,429. 
C) $1,000. 
D) $700. 
A) $3,333. 
B) $1,429. 
C) $1,000. 
D) $700.

Question 13

At the break-even point for the consumption function

Accepted Answer

A) saving is positive. 
B) saving is negative. 
C) saving is zero. 
D) the marginal propensity to consume equals l. 
A) saving is positive. 
B) saving is negative. 
C) saving is zero. 
D) the marginal propensity to consume equals l.

Question 14

If autonomous investment increases by $200 billion and the marginal propensity to consume (MPC)is 0.5,then

Accepted Answer

A) real Gross Domestic Product (GDP)will rise by $400 billion. 
B) real Gross Domestic Product (GDP)will rise by $200 billion. 
C) real Gross Domestic Product (GDP)will rise by $100 billion. 
D) real Gross Domestic Product (GDP)will decrease by $100 billion. 
A) real Gross Domestic Product (GDP)will rise by $400 billion. 
B) real Gross Domestic Product (GDP)will rise by $200 billion. 
C) real Gross Domestic Product (GDP)will rise by $100 billion. 
D) real Gross Domestic Product (GDP)will decrease by $100 billion.

Question 15

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 16

If the multiplier has a value of 10,then the value of the marginal propensity to save (MPS)is

Accepted Answer

A) 1.00. 
B) 0.90. 
C) 10.00. 
D) 0.10. 
A) 1.00. 
B) 0.90. 
C) 10.00. 
D) 0.10.

Question 17

If the marginal propensity to save (MPS)is 0.5 and net exports falls by $100 million,then

Accepted Answer

A) real Gross Domestic Product (GDP)will increase by $100 million. 
B) real Gross Domestic Product (GDP)will fall by $200 million. 
C) real Gross Domestic Product (GDP)will not change. 
D) the effect on real Gross Domestic Product (GDP)cannot be determined from the given information. 
A) real Gross Domestic Product (GDP)will increase by $100 million. 
B) real Gross Domestic Product (GDP)will fall by $200 million. 
C) real Gross Domestic Product (GDP)will not change. 
D) the effect on real Gross Domestic Product (GDP)cannot be determined from the given information.

Question 18

The difference between a stock and a flow is

Accepted Answer

A) a stock is something measured at one point in time while a flow is something that is expressed per unit of time. 
B) a stock is something measured at one point in time while a flow is something that is fixed. 
C) a stock is expressed per unit of time while a flow is measured at one point in time. 
D) a stock refers to the solid inventory firms have on hand while a flow refers to the liquid inventory firms have on hand. 
A) a stock is something measured at one point in time while a flow is something that is expressed per unit of time. 
B) a stock is something measured at one point in time while a flow is something that is fixed. 
C) a stock is expressed per unit of time while a flow is measured at one point in time. 
D) a stock refers to the solid inventory firms have on hand while a flow refers to the liquid inventory firms have on hand.

Question 19

When a household's disposable income falls to zero,what do we expect will happen?

Accepted Answer

A) The household's consumption spending also falls to zero. 
B) The household will maintain a positive level of saving. 
C) The household will maintain its previous level of consumption. 
D) Consumption will fall to the level of autonomous consumption. 
A) The household's consumption spending also falls to zero. 
B) The household will maintain a positive level of saving. 
C) The household will maintain its previous level of consumption. 
D) Consumption will fall to the level of autonomous consumption.

Question 20

-Use the above table.Which of the following is true if real disposable income is $150?

Accepted Answer

A) APC is less than MPC. 
B) APC = 0.8. 
C) APS = 0.2. 
D) APS is less than MPS. 
A) APC is less than MPC. 
B) APC = 0.8. 
C) APS = 0.2. 
D) APS is less than MPS.

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

The consumption function will shift with

The stock of assets owned by a person,household,firm or nation is

Which of the following is true?

Which one of the following statements is true?

-Refer to the above table.The table gives the combinations of real disposable income and real consumption for a college student for a year.What is the value of the average propensity to save equal when real disposable income equals $14,000?

The multiplier effect applies to any

Suppose that the marginal propensity to save (MPS)equals 0.2.The value of the multiplier would be

If the MPC equals 0.75,then

If the average propensity to consume is initially 1.0,the marginal propensity to consume is 0.75,and real disposable income increases by $1000,the new value of saving is

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

Suppose marginal propensity to consume (MPC)is 0.7 and there is a $1,000 increase in autonomous consumption.Given this information,real GDP will increase by

At the break-even point for the consumption function

If autonomous investment increases by $200 billion and the marginal propensity to consume (MPC)is 0.5,then

The consumption function shows

If the multiplier has a value of 10,then the value of the marginal propensity to save (MPS)is

If the marginal propensity to save (MPS)is 0.5 and net exports falls by $100 million,then

The difference between a stock and a flow is

When a household's disposable income falls to zero,what do we expect will happen?

-Use the above table.Which of the following is true if real disposable income is $150?

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

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

The consumption function will shift with

The stock of assets owned by a person,household,firm or nation is

Which of the following is true?

Which one of the following statements is true?

-Refer to the above table.The table gives the combinations of real disposable income and real consumption for a college student for a year.What is the value of the average propensity to save equal when real disposable income equals $14,000?

The multiplier effect applies to any

Suppose that the marginal propensity to save (MPS)equals 0.2.The value of the multiplier would be

If the MPC equals 0.75,then

If the average propensity to consume is initially 1.0,the marginal propensity to consume is 0.75,and real disposable income increases by $1000,the new value of saving is

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

Suppose marginal propensity to consume (MPC)is 0.7 and there is a $1,000 increase in autonomous consumption.Given this information,real GDP will increase by

At the break-even point for the consumption function

If autonomous investment increases by $200 billion and the marginal propensity to consume (MPC)is 0.5,then

The consumption function shows

If the multiplier has a value of 10,then the value of the marginal propensity to save (MPS)is

If the marginal propensity to save (MPS)is 0.5 and net exports falls by $100 million,then

The difference between a stock and a flow is

When a household's disposable income falls to zero,what do we expect will happen?

-Use the above table.Which of the following is true if real disposable income is $150?

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