Question 1

Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by:

Accepted Answer

A)  $3 billion. 
B)  $2/3 billion. 
C)  $2 billion. 
D)  $6 billion. 
A)  $3 billion. 
B)  $2/3 billion. 
C)  $2 billion. 
D)  $6 billion. D

Question 2

Which of the following equations represents the saving schedule implicit in the data below?

Accepted Answer

A)  S = C - Yd 
B)  S = 40 + .4Yd 
C)  S = 40 + .6Yd 
D)  S = -40 + .4Yd 
A)  S = C - Yd 
B)  S = 40 + .4Yd 
C)  S = 40 + .6Yd 
D)  S = -40 + .4Yd D

Question 3

If a $200 billion increase in investment spending creates $200 billion of new income in the first round of the multiplier process and $160 billion in the second round, the multiplier in the economy is:

Accepted Answer

A)  4. 
B)  5. 
C)  3.33. 
D)  2.5. 
A)  4. 
B)  5. 
C)  3.33. 
D)  2.5. B

Question 4

-The above figure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the largest multiplier?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 5

With an MPS of .4, the MPC will be:

Accepted Answer

A)  1.0 minus .4. 
B)  .4 minus 1.0. 
C)  the reciprocal of the MPS. 
D)  .4. 
A)  1.0 minus .4. 
B)  .4 minus 1.0. 
C)  the reciprocal of the MPS. 
D)  .4.

Question 6

If the MPC is .8 and the disposable income is $200, then

Accepted Answer

A)  consumption and saving cannot be determined from the information given. 
B)  saving will be $20. 
C)  personal consumption expenditures will be $80. 
D)  saving will be $40. 
A)  consumption and saving cannot be determined from the information given. 
B)  saving will be $20. 
C)  personal consumption expenditures will be $80. 
D)  saving will be $40.

Question 7

If a consumption schedule shifts upward, this means that the:

Accepted Answer

A)  MPC has increased. 
B)  MPS has decreased. 
C)  APC is now higher at each level of disposable income. 
D)  APC is now lower at each level of disposable income. 
A)  MPC has increased. 
B)  MPS has decreased. 
C)  APC is now higher at each level of disposable income. 
D)  APC is now lower at each level of disposable income.

Question 8

The real interest rate is:

Accepted Answer

A)  the percentage increase in money that the lender receives on a loan. 
B)  the nominal rate less the rate of inflation . 
C)  also called the after-tax interest rate. 
D)  usually higher than the nominal interest rate. 
A)  the percentage increase in money that the lender receives on a loan. 
B)  the nominal rate less the rate of inflation . 
C)  also called the after-tax interest rate. 
D)  usually higher than the nominal interest rate.

Question 9

The most important determinant of consumption and saving is the:

Accepted Answer

A)  level of bank credit. 
B)  level of disposable income. 
C)  interest rate. 
D)  price level. 
A)  level of bank credit. 
B)  level of disposable income. 
C)  interest rate. 
D)  price level.

Question 10

A $1 billion increase in investment will cause a:

Accepted Answer

A)  (1/MPS) billion increase in equilibrium GDP. 
B)  (MPS) billion increase in equilibrium GDP. 
C)  (1 - MP
C)  billion increase in equilibrium GDP. 
D)  (MPC - MPS) billion increase in equilibrium GDP. 
A)  (1/MPS) billion increase in equilibrium GDP. 
B)  (MPS) billion increase in equilibrium GDP. 
C)  (1 - MP
C)  billion increase in equilibrium GDP. 
D)  (MPC - MPS) billion increase in equilibrium GDP.

Question 11

The slope of the consumption schedule is equal to the marginal propensity to consume.

Accepted Answer

A) True 
 B)False

Question 12

If the MPS is only half as large as the MPC, the multiplier:

Accepted Answer

A)  is 2. 
B)  is 3. 
C)  is 4. 
D)  cannot be determined from the information given. 
A)  is 2. 
B)  is 3. 
C)  is 4. 
D)  cannot be determined from the information given.

Question 13

The simple multiplier may be calculated as:

Accepted Answer

A)  1/(MPS + MP
C) . 
B)  1/(1 - MP
C) . 
C)  MPC/MPS. 
D)  1 - MPC = MPS. 
A)  1/(MPS + MP
C) . 
B)  1/(1 - MP
C) . 
C)  MPC/MPS. 
D)  1 - MPC = MPS.

Question 14

Firms make planned changes to their inventories:

Accepted Answer

A)  if they are expecting either faster or slower sales. 
B)  if they are expecting a faster sale. 
C)  if they are expecting a slower sale. 
D)  if they are expecting a decrease in labor costs. 
A)  if they are expecting either faster or slower sales. 
B)  if they are expecting a faster sale. 
C)  if they are expecting a slower sale. 
D)  if they are expecting a decrease in labor costs.

Question 15

Following is consumption schedules for three private closed economies. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars.
  
-Refer to the above data. At an income level of $400 billion, the average propensity to save in economy (2) is:

Accepted Answer

A)  .9125. 
B)  .0725. 
C)  .0875. 
D)  .9305. 
A)  .9125. 
B)  .0725. 
C)  .0875. 
D)  .9305.

Question 16

If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round, the multiplier in the economy is:

Accepted Answer

A)  2. 
B)  3.33. 
C)  5. 
D)  10. 
A)  2. 
B)  3.33. 
C)  5. 
D)  10.

Question 17

Assume that for the entire business sector of a private closed economy there is $0 worth of investment projects which will yield an expected rate of return of 25 percent or more. But there are $15 worth of investments which will yield an expected rate of return of 20-25 percent; another $15 with an expected rate of return of 15-20 percent; and similarly an additional $15 of investment projects in each successive rate of return range down to and including the 0-5 percent range.   Which of the lines on the above diagram represents these data?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 18

-Refer to the above diagram. The marginal propensity to consume is equal to:

Accepted Answer

A)  AE/0E. 
B)  CB/AB. 
C)  CF/CD. 
D)  CD/CF. 
A)  AE/0E. 
B)  CB/AB. 
C)  CF/CD. 
D)  CD/CF.

Question 19

The simple multiplier is:

Accepted Answer

A)  1/APS. 
B)  1/APC. 
C)  1/MPC. 
D)  1/MPS. 
A)  1/APS. 
B)  1/APC. 
C)  1/MPC. 
D)  1/MPS.

Question 20

The increase in income which results from an increase in investment spending would be greater the:

Accepted Answer

A)  smaller the MPS. 
B)  smaller the APC. 
C)  larger the MPS. 
D)  smaller the MPC. 
A)  smaller the MPS. 
B)  smaller the APC. 
C)  larger the MPS. 
D)  smaller the MPC.

Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by:

Which of the following equations represents the saving schedule implicit in the data below?

If a $200 billion increase in investment spending creates $200 billion of new income in the first round of the multiplier process and $160 billion in the second round, the multiplier in the economy is:

-The above figure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the largest multiplier?

With an MPS of .4, the MPC will be:

If the MPC is .8 and the disposable income is $200, then

If a consumption schedule shifts upward, this means that the:

The real interest rate is:

The most important determinant of consumption and saving is the:

A $1 billion increase in investment will cause a:

The slope of the consumption schedule is equal to the marginal propensity to consume.

If the MPS is only half as large as the MPC, the multiplier:

The simple multiplier may be calculated as:

Firms make planned changes to their inventories:

Following is consumption schedules for three private closed economies. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. -Refer to the above data. At an income level of $400 billion, the average propensity to save in economy (2) is:

If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round, the multiplier in the economy is:

-Refer to the above diagram. The marginal propensity to consume is equal to:

The simple multiplier is:

The increase in income which results from an increase in investment spending would be greater the:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Financial Economics

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters

Exam 8: Basic Macroeconomic Relationships

Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by:

Which of the following equations represents the saving schedule implicit in the data below?

If a $200 billion increase in investment spending creates $200 billion of new income in the first round of the multiplier process and $160 billion in the second round, the multiplier in the economy is:

-The above figure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the largest multiplier?

With an MPS of .4, the MPC will be:

If the MPC is .8 and the disposable income is $200, then

If a consumption schedule shifts upward, this means that the:

The real interest rate is:

The most important determinant of consumption and saving is the:

A $1 billion increase in investment will cause a:

The slope of the consumption schedule is equal to the marginal propensity to consume.

If the MPS is only half as large as the MPC, the multiplier:

The simple multiplier may be calculated as:

Firms make planned changes to their inventories:

Following is consumption schedules for three private closed economies. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. -Refer to the above data. At an income level of $400 billion, the average propensity to save in economy (2) is:

If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round, the multiplier in the economy is:

-Refer to the above diagram. The marginal propensity to consume is equal to:

The simple multiplier is:

The increase in income which results from an increase in investment spending would be greater the:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Financial Economics

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters