Question 1

The equation   is the

Accepted Answer

A) average propensity to consume. 
B) average propensity to save. 
C) marginal propensity to consume. 
D) marginal propensity to save. 
A) average propensity to consume. 
B) average propensity to save. 
C) marginal propensity to consume. 
D) marginal propensity to save.

Question 2

The investment schedule is downward sloping and the saving schedule is upward sloping with respect to the interest rate.Suppose the equilibrium real investment per year at the market rate of interest is $1 trillion.How is this represented when real national income per year is on the horizontal axis? How is this incorporated into the consumption-function graph?

Accepted Answer

Investment spending is a function of the

Question 3

Which of the following would NOT be considered a consumption good?

Accepted Answer

A) A new sweater 
B) Tools used to cut metal on an auto production line 
C) A jar of Skippy peanut butter 
D) A bottle of Scotch whiskey 
A) A new sweater 
B) Tools used to cut metal on an auto production line 
C) A jar of Skippy peanut butter 
D) A bottle of Scotch whiskey

Question 4

A decrease in autonomous investment of $100 that occurs when the marginal propensity to save (MPS)equals 0.25 will lead to a decrease in real Gross Domestic Product (GDP)of

Accepted Answer

A) $25. 
B) $100. 
C) $400. 
D) $800. 
A) $25. 
B) $100. 
C) $400. 
D) $800.

Question 5

Which one of the following statements is true?

Accepted Answer

A) The investment function is positively sloped to reflect the fact that higher interest rates cause more people to invest their funds. 
B) The investment function is positively sloped to reflect the fact that lower interest rates cause more firms to expand their operations. 
C) Along a given investment function,higher interest rates result in more investment projects being undertaken. 
D) Along a given investment function,higher interest rates result in fewer investment projects being undertaken. 
A) The investment function is positively sloped to reflect the fact that higher interest rates cause more people to invest their funds. 
B) The investment function is positively sloped to reflect the fact that lower interest rates cause more firms to expand their operations. 
C) Along a given investment function,higher interest rates result in more investment projects being undertaken. 
D) Along a given investment function,higher interest rates result in fewer investment projects being undertaken.

Question 6

Suppose the marginal propensity to consume (MPC)equals 0.80,an increase in autonomous investment of $100 will lead to an increase in real Gross Domestic Product (GDP)by

Accepted Answer

A) $100. 
B) $400. 
C) $500. 
D) $800. 
A) $100. 
B) $400. 
C) $500. 
D) $800.

Question 7

-In the above figure,at an income level of Y3 and planned expenditures of (C + I)1,

Accepted Answer

A) planned saving exceeds planned investment. 
B) the economy is in equilibrium. 
C) the quantity of aggregate demand exceeds real Gross Domestic Product (GDP). 
D) there is full employment. 
A) planned saving exceeds planned investment. 
B) the economy is in equilibrium. 
C) the quantity of aggregate demand exceeds real Gross Domestic Product (GDP). 
D) there is full employment.

Question 8

-In the above table,the average propensity to consume when income is $10,000 is

Accepted Answer

A) 0.8. 
B) 0.2. 
C) 0.0. 
D) 0.9. 
A) 0.8. 
B) 0.2. 
C) 0.0. 
D) 0.9.

Question 9

According to the above figure,autonomous consumption equals

Accepted Answer

A) $0. 
B) $5,000. 
C) $20,000. 
D) -$5,000. 
A) $0. 
B) $5,000. 
C) $20,000. 
D) -$5,000.

Question 10

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

Accepted Answer

A) 0.8. 
B) 1. 
C) 4. 
D) 5. 
A) 0.8. 
B) 1. 
C) 4. 
D) 5.

Question 11

The average propensity to consume (APC)equals

Accepted Answer

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

Question 12

What is the significance of the multiplier? What causes the multiplier to be larger or smaller?

Accepted Answer

The multiplier is important because it m

Question 13

-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 14

Government purchases

Accepted Answer

A) are determined by the public. 
B) are determined by the political process. 
C) are influenced by interest rates. 
D) are determined by suppliers. 
A) are determined by the public. 
B) are determined by the political process. 
C) are influenced by interest rates. 
D) are determined by suppliers.

Question 15

Which one of the following statements is true?

Accepted Answer

A) Over the years,real consumption spending has been more volatile than real investment spending. 
B) Over the years,real investment spending has been more volatile than real consumption spending. 
C) Domestic real investment in the United States was highest during the Great Depression. 
D) In the Keynesian model,changes in the volume of real investment spending are fully explained by changes in the real interest rate. 
A) Over the years,real consumption spending has been more volatile than real investment spending. 
B) Over the years,real investment spending has been more volatile than real consumption spending. 
C) Domestic real investment in the United States was highest during the Great Depression. 
D) In the Keynesian model,changes in the volume of real investment spending are fully explained by changes in the real interest rate.

Question 16

What can we say about APC + APS and MPC + MPS?

Accepted Answer

A) Each must sum to 1. 
B) MPC + MPS = 100% of total income. 
C) APC + APS = 100% of the change in income. 
D) MPC + MPS always equals 1,but the sum of APC + APS can vary. 
A) Each must sum to 1. 
B) MPC + MPS = 100% of total income. 
C) APC + APS = 100% of the change in income. 
D) MPC + MPS always equals 1,but the sum of APC + APS can vary.

Question 17

If the marginal propensity to consume (MPC)is 0.8 and there is a desire to increase real GDP by $500 billion,then

Accepted Answer

A) an increase in autonomous real consumption spending of $500 billion will generate this change. 
B) a decrease in autonomous real saving of $500 billion will generate this change. 
C) an increase in planned real investment spending of $200 billion will generate this change. 
D) an increase in real autonomous spending of $100 billion will generate this change. 
A) an increase in autonomous real consumption spending of $500 billion will generate this change. 
B) a decrease in autonomous real saving of $500 billion will generate this change. 
C) an increase in planned real investment spending of $200 billion will generate this change. 
D) an increase in real autonomous spending of $100 billion will generate this change.

Question 18

If the MPC is 0.8,then the MPS is

Accepted Answer

A) 0.2. 
B) 1. 
C) 5. 
D) 8. 
A) 0.2. 
B) 1. 
C) 5. 
D) 8.

Question 19

An increase in autonomous consumption means that

Accepted Answer

A) the consumption function shifts down. 
B) the consumption function shifts up. 
C) the consumption function becomes steeper. 
D) the consumption function becomes less steep. 
A) the consumption function shifts down. 
B) the consumption function shifts up. 
C) the consumption function becomes steeper. 
D) the consumption function becomes less steep.

Question 20

-According to the above table,the marginal propensity to consume is

Accepted Answer

A) 0.6. 
B) 0.5. 
C) 0.75. 
D) 0.8. 
A) 0.6. 
B) 0.5. 
C) 0.75. 
D) 0.8.

The equation is the

Which of the following would NOT be considered a consumption good?

A decrease in autonomous investment of $100 that occurs when the marginal propensity to save (MPS)equals 0.25 will lead to a decrease in real Gross Domestic Product (GDP)of

Which one of the following statements is true?

Suppose the marginal propensity to consume (MPC)equals 0.80,an increase in autonomous investment of $100 will lead to an increase in real Gross Domestic Product (GDP)by

-In the above figure,at an income level of Y3 and planned expenditures of (C + I)1,

-In the above table,the average propensity to consume when income is $10,000 is

According to the above figure,autonomous consumption equals

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

The average propensity to consume (APC)equals

What is the significance of the multiplier? What causes the multiplier to be larger or smaller?

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

Government purchases

Which one of the following statements is true?

What can we say about APC + APS and MPC + MPS?

If the marginal propensity to consume (MPC)is 0.8 and there is a desire to increase real GDP by $500 billion,then

If the MPC is 0.8,then the MPS is

An increase in autonomous consumption means that

-According to the above table,the marginal propensity to consume is

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 equation is the

Which of the following would NOT be considered a consumption good?

A decrease in autonomous investment of $100 that occurs when the marginal propensity to save (MPS)equals 0.25 will lead to a decrease in real Gross Domestic Product (GDP)of

Which one of the following statements is true?

Suppose the marginal propensity to consume (MPC)equals 0.80,an increase in autonomous investment of $100 will lead to an increase in real Gross Domestic Product (GDP)by

-In the above figure,at an income level of Y3 and planned expenditures of (C + I)1,

-In the above table,the average propensity to consume when income is $10,000 is

According to the above figure,autonomous consumption equals

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

The average propensity to consume (APC)equals

What is the significance of the multiplier? What causes the multiplier to be larger or smaller?

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

Government purchases

Which one of the following statements is true?

What can we say about APC + APS and MPC + MPS?

If the marginal propensity to consume (MPC)is 0.8 and there is a desire to increase real GDP by $500 billion,then

If the MPC is 0.8,then the MPS is

An increase in autonomous consumption means that

-According to the above table,the marginal propensity to consume is

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