Question 1

Which of the following will not tend to shift the consumption schedule upward?

Accepted Answer

A)  a currently small stock of durable goods in the possession of consumers 
B)  the expectation of a future decline in the consumer price index 
C)  a currently low level of household debt. 
D)  the expectation of future shortages of essential consumer goods. 
A)  a currently small stock of durable goods in the possession of consumers 
B)  the expectation of a future decline in the consumer price index 
C)  a currently low level of household debt. 
D)  the expectation of future shortages of essential consumer goods.

Question 2

The saving schedule shown in the diagram below would shift downward if, all else equal:

Accepted Answer

A)  the average propensity to save increased at each income level. 
B)  the marginal propensity to save rose at each income level. 
C)  consumer wealth rose rapidly because of a significant increase in stock market prices. 
D)  the real interest rate increased. 
A)  the average propensity to save increased at each income level. 
B)  the marginal propensity to save rose at each income level. 
C)  consumer wealth rose rapidly because of a significant increase in stock market prices. 
D)  the real interest rate increased.

Question 3

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. The marginal propensity to save:

Accepted Answer

A)  is highest in economy (1). 
B)  is highest in economy (2). 
C)  is highest in economy (3). 
D)  cannot be determined from the data given. 
A)  is highest in economy (1). 
B)  is highest in economy (2). 
C)  is highest in economy (3). 
D)  cannot be determined from the data given.

Question 4

The slope of the consumption schedule is measured by the MPC.

Accepted Answer

A) True 
 B)False

Question 5

The multiplier:

Accepted Answer

A)  varies directly with the slope of the investment-demand schedule. 
B)  is unrelated to the slope of the saving schedule. 
C)  will be greater, the smaller the slope of the saving schedule. 
D)  will be greater, the steeper the slope of the saving schedule. 
A)  varies directly with the slope of the investment-demand schedule. 
B)  is unrelated to the slope of the saving schedule. 
C)  will be greater, the smaller the slope of the saving schedule. 
D)  will be greater, the steeper the slope of the saving schedule.

Question 6

If the marginal propensity to save is 0.2 in a private closed economy, a $20 billion rise in investment spending will increase:

Accepted Answer

A)  GDP by $120 billion. 
B)  GDP by $20 billion. 
C)  saving by $25 billion. 
D)  consumption by $80 billion. 
A)  GDP by $120 billion. 
B)  GDP by $20 billion. 
C)  saving by $25 billion. 
D)  consumption by $80 billion.

Question 7

Suppose an economy's consumption schedule shifts from C1 to C 2 as shown in the diagram below. We can say that its:

Accepted Answer

A)  MPC has increased but its APC at each income level is unchanged. 
B)  APC at each income level is increased but its MPC is unchanged. 
C)  MPC and APC at each income level have both increased. 
D)  MPC and APC at each income level have both decreased. 
A)  MPC has increased but its APC at each income level is unchanged. 
B)  APC at each income level is increased but its MPC is unchanged. 
C)  MPC and APC at each income level have both increased. 
D)  MPC and APC at each income level have both decreased.

Question 8

If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inflation rate is:

Accepted Answer

A)  18 percent. 
B)  24 percent. 
C)  12 percent. 
D)  6 percent. 
A)  18 percent. 
B)  24 percent. 
C)  12 percent. 
D)  6 percent.

Question 9

Suppose a family's consumption exceeds its disposable income. This means that its:

Accepted Answer

A)  MPC is greater than 1. 
B)  MPS is negative. 
C)  APC is greater than 1. 
D)  APS is positive. 
A)  MPC is greater than 1. 
B)  MPS is negative. 
C)  APC is greater than 1. 
D)  APS is positive.

Question 10

-The above table reflects a(n):

Accepted Answer

A)  interest rate schedule. 
B)  demand-for-money schedule. 
C)  investment-demand schedule. 
D)  profit schedule. 
A)  interest rate schedule. 
B)  demand-for-money schedule. 
C)  investment-demand schedule. 
D)  profit schedule.

Question 11

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

Accepted Answer

A)  CD/0D. 
B)  0B/0A. 
C)  0D/0D. 
D)  CD/BD. 
A)  CD/0D. 
B)  0B/0A. 
C)  0D/0D. 
D)  CD/BD.

Question 12

Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return on this tool is:

Accepted Answer

A)  80 percent. 
B)  8 percent. 
C)  2 percent. 
D)  20 percent. 
A)  80 percent. 
B)  8 percent. 
C)  2 percent. 
D)  20 percent.

Question 13

A business firm will purchase additional capital goods if the real rate of interest it must pay is less than the expected rate of return from the investment.

Accepted Answer

A) True 
 B)False

Question 14

The APC can be defined as the fraction of a:

Accepted Answer

A)  change in income which is not spent. 
B)  change in income which is spent. 
C)  specific level of total income which is not consumed. 
D)  specific level of total income which is consumed. 
A)  change in income which is not spent. 
B)  change in income which is spent. 
C)  specific level of total income which is not consumed. 
D)  specific level of total income which is consumed.

Question 15

If the marginal propensity to consume is 0.9 in a private closed economy, a $20 billion decline in investment spending will decrease:

Accepted Answer

A)  GDP by $20 billion. 
B)  GDP by $100 billion. 
C)  saving by $20 billion. 
D)  consumption by $200 billion. 
A)  GDP by $20 billion. 
B)  GDP by $100 billion. 
C)  saving by $20 billion. 
D)  consumption by $200 billion.

Question 16

The consumption schedule is drawn on the assumption that as disposable income increases consumption will:

Accepted Answer

A)  be unaffected. 
B)  increase absolutely, but remain constant as a percentage of income. 
C)  increase absolutely, but decline as a percentage of income. 
D)  increase absolutely and as a percentage of income. 
A)  be unaffected. 
B)  increase absolutely, but remain constant as a percentage of income. 
C)  increase absolutely, but decline as a percentage of income. 
D)  increase absolutely and as a percentage of income.

Question 17

Other things equal, if the real interest rate falls and business taxes rise:

Accepted Answer

A)  investment will rise until it is equal to saving. 
B)  we will be uncertain as to the resulting change in investment. 
C)  we can be certain that investment will rise. 
D)  we can be certain that investment will fall. 
A)  investment will rise until it is equal to saving. 
B)  we will be uncertain as to the resulting change in investment. 
C)  we can be certain that investment will rise. 
D)  we can be certain that investment will fall.

Question 18

The average propensity to consume can be defined as income divided by consumption.

Accepted Answer

A) True 
 B)False

Question 19

-The above figure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the highest marginal propensity to consume?

Accepted Answer

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

Question 20

The investment-demand curve will shift to the left as a result of:

Accepted Answer

A)  an increase in the excess productive capacity available in industry. 
B)  a decrease in business taxes. 
C)  increased business optimism with respect to future economic conditions. 
D)  a decrease in labor costs. 
A)  an increase in the excess productive capacity available in industry. 
B)  a decrease in business taxes. 
C)  increased business optimism with respect to future economic conditions. 
D)  a decrease in labor costs.

Which of the following will not tend to shift the consumption schedule upward?

The saving schedule shown in the diagram below would shift downward if, all else equal:

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. The marginal propensity to save:

The slope of the consumption schedule is measured by the MPC.

The multiplier:

If the marginal propensity to save is 0.2 in a private closed economy, a $20 billion rise in investment spending will increase:

Suppose an economy's consumption schedule shifts from C₁ to C ₂ as shown in the diagram below. We can say that its:

If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inflation rate is:

Suppose a family's consumption exceeds its disposable income. This means that its:

-The above table reflects a(n):

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

Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return on this tool is:

A business firm will purchase additional capital goods if the real rate of interest it must pay is less than the expected rate of return from the investment.

The APC can be defined as the fraction of a:

If the marginal propensity to consume is 0.9 in a private closed economy, a $20 billion decline in investment spending will decrease:

The consumption schedule is drawn on the assumption that as disposable income increases consumption will:

Other things equal, if the real interest rate falls and business taxes rise:

The average propensity to consume can be defined as income divided by consumption.

-The above figure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the highest marginal propensity to consume?

The investment-demand curve will shift to the left as a result of:

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

Which of the following will not tend to shift the consumption schedule upward?

The saving schedule shown in the diagram below would shift downward if, all else equal:

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. The marginal propensity to save:

The slope of the consumption schedule is measured by the MPC.

The multiplier:

If the marginal propensity to save is 0.2 in a private closed economy, a $20 billion rise in investment spending will increase:

Suppose an economy's consumption schedule shifts from C1 to C 2 as shown in the diagram below. We can say that its:

If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inflation rate is:

Suppose a family's consumption exceeds its disposable income. This means that its:

-The above table reflects a(n):

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

Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return on this tool is:

A business firm will purchase additional capital goods if the real rate of interest it must pay is less than the expected rate of return from the investment.

The APC can be defined as the fraction of a:

If the marginal propensity to consume is 0.9 in a private closed economy, a $20 billion decline in investment spending will decrease:

The consumption schedule is drawn on the assumption that as disposable income increases consumption will:

Other things equal, if the real interest rate falls and business taxes rise:

The average propensity to consume can be defined as income divided by consumption.

-The above figure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the highest marginal propensity to consume?

The investment-demand curve will shift to the left as a result of:

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

Suppose an economy's consumption schedule shifts from C₁ to C ₂ as shown in the diagram below. We can say that its: