Question 1

A rightward shift of the investment-demand curve might be caused by:

Accepted Answer

A)  an increase in the price level. 
B)  a decline in the real interest rate. 
C)  a decline in the acquisition, maintenance and operating costs. 
D)  an increase in business taxes. 
A)  an increase in the price level. 
B)  a decline in the real interest rate. 
C)  a decline in the acquisition, maintenance and operating costs. 
D)  an increase in business taxes.

Question 2

The reverse wealth effect will tend to decrease consumption and increase saving.

Accepted Answer

A) True 
 B)False

Question 3

If DI is $275 billion and the APC is 0.8, it can be concluded that saving is $55 billion.

Accepted Answer

A) True 
 B)False

Question 4

If Smith's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, it may be concluded that her marginal propensity to:

Accepted Answer

A)  save is three-fifths. 
B)  consume is one-half. 
C)  consume is three-fifths. 
D)  consume is one-sixth. 
A)  save is three-fifths. 
B)  consume is one-half. 
C)  consume is three-fifths. 
D)  consume is one-sixth.

Question 5

If the real interest rate in the economy is i and the expected rate of return from additional investment is r, then more investment will be forthcoming when:

Accepted Answer

A)  r is greater than i. 
B)  i is greater than r. 
C)  r falls. 
D)  i rises. 
A)  r is greater than i. 
B)  i is greater than r. 
C)  r falls. 
D)  i rises.

Question 6

Which of the following will not cause the consumption schedule to shift?

Accepted Answer

A)  a sharp increase in the amount of wealth held by households 
B)  a change in consumer incomes 
C)  the expectation of a recession 
D)  a growing expectation that consumer durables will be in short supply 
A)  a sharp increase in the amount of wealth held by households 
B)  a change in consumer incomes 
C)  the expectation of a recession 
D)  a growing expectation that consumer durables will be in short supply

Question 7

If Ben's MPC is .80, this means that he will:

Accepted Answer

A)  spend eight-tenths of any increase in his disposable income. 
B)  spend eight-tenths of any level of disposable income. 
C)  break even when his disposable income is $8,000. 
D)  save eight-tenths of any level of disposable income. 
A)  spend eight-tenths of any increase in his disposable income. 
B)  spend eight-tenths of any level of disposable income. 
C)  break even when his disposable income is $8,000. 
D)  save eight-tenths of any level of disposable income.

Question 8

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

Accepted Answer

A)  .2. 
B)  .8. 
C)  .4. 
D)  .3. 
A)  .2. 
B)  .8. 
C)  .4. 
D)  .3.

Question 9

The simple multiplier is defined as:

Accepted Answer

A)  1 - MPS. 
B)  change in GDP × initial change in spending. 
C)  change in GDP/initial change in spending. 
D)  change in GDP - initial change in spending. 
A)  1 - MPS. 
B)  change in GDP × initial change in spending. 
C)  change in GDP/initial change in spending. 
D)  change in GDP - initial change in spending.

Question 10

Economists disagree on the actual size of the multiplier.

Accepted Answer

A) True 
 B)False

Question 11

The MPC 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)  given total income which is not consumed. 
D)  given total income which is consumed. 
A)  change in income which is not spent. 
B)  change in income which is spent. 
C)  given total income which is not consumed. 
D)  given total income which is consumed.

Question 12

If the inflation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is:

Accepted Answer

A)  2 percent. 
B)  zero percent. 
C)  10 percent. 
D)  22 percent. 
A)  2 percent. 
B)  zero percent. 
C)  10 percent. 
D)  22 percent.

Question 13

-Refer to the above diagram. The APC diminishes as income increases for:

Accepted Answer

A)  none of the consumption schedules shown. 
B)  C3 only. 
C)  C1, and C2. 
D)  C4 only. 
A)  none of the consumption schedules shown. 
B)  C3 only. 
C)  C1, and C2. 
D)  C4 only.

Question 14

If the MPC is constant at various levels of income, then the APC must also be constant at all of these income levels.

Accepted Answer

A) True 
 B)False

Question 15

The wealth effect will tend to decrease consumption and increase saving.

Accepted Answer

A) True 
 B)False

Question 16

The immediate determinants of investment spending are the:

Accepted Answer

A)  expected rate of return on capital goods and the real interest rate. 
B)  level of saving and the real interest rate. 
C)  marginal propensity to consume and the real interest rate. 
D)  interest rate and the expected price level. 
A)  expected rate of return on capital goods and the real interest rate. 
B)  level of saving and the real interest rate. 
C)  marginal propensity to consume and the real interest rate. 
D)  interest rate and the expected price level.

Question 17

Refer to the data below. When plotted on a graph, the vertical intercept of the consumption schedule in this economy is _____ and the slope is _____.

Accepted Answer

A)  -2 and 1 
B)  $2 and .18 
C)  $100 and .5 
D)  $2 and .9 
A)  -2 and 1 
B)  $2 and .18 
C)  $100 and .5 
D)  $2 and .9

Question 18

Assume the economy's consumption and saving schedules simultaneously shift downward. This must be the result of:

Accepted Answer

A)  an increase in disposable income. 
B)  an increase in household wealth. 
C)  the expectation of a recession. 
D)  an increase in personal taxes 
A)  an increase in disposable income. 
B)  an increase in household wealth. 
C)  the expectation of a recession. 
D)  an increase in personal taxes

Question 19

At the point where the consumption schedule intersects the 45-degree line:

Accepted Answer

A)  the MPC equals 1. 
B)  the APC is zero. 
C)  saving equals income. 
D)  saving is zero. 
A)  the MPC equals 1. 
B)  the APC is zero. 
C)  saving equals income. 
D)  saving is zero.

Question 20

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

Accepted Answer

A)  CD/EF. 
B)  CB/CF. 
C)  CB/AF. 
D)  EF/CB. 
A)  CD/EF. 
B)  CB/CF. 
C)  CB/AF. 
D)  EF/CB.

A rightward shift of the investment-demand curve might be caused by:

The reverse wealth effect will tend to decrease consumption and increase saving.

If DI is $275 billion and the APC is 0.8, it can be concluded that saving is $55 billion.

If Smith's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, it may be concluded that her marginal propensity to:

If the real interest rate in the economy is i and the expected rate of return from additional investment is r, then more investment will be forthcoming when:

Which of the following will not cause the consumption schedule to shift?

If Ben's MPC is .80, this means that he will:

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

The simple multiplier is defined as:

Economists disagree on the actual size of the multiplier.

The MPC can be defined as the fraction of a:

If the inflation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is:

-Refer to the above diagram. The APC diminishes as income increases for:

If the MPC is constant at various levels of income, then the APC must also be constant at all of these income levels.

The wealth effect will tend to decrease consumption and increase saving.

The immediate determinants of investment spending are the:

Refer to the data below. When plotted on a graph, the vertical intercept of the consumption schedule in this economy is _ and the slope is _.

Assume the economy's consumption and saving schedules simultaneously shift downward. This must be the result of:

At the point where the consumption schedule intersects the 45-degree line:

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

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

A rightward shift of the investment-demand curve might be caused by:

The reverse wealth effect will tend to decrease consumption and increase saving.

If DI is $275 billion and the APC is 0.8, it can be concluded that saving is $55 billion.

If Smith's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, it may be concluded that her marginal propensity to:

If the real interest rate in the economy is i and the expected rate of return from additional investment is r, then more investment will be forthcoming when:

Which of the following will not cause the consumption schedule to shift?

If Ben's MPC is .80, this means that he will:

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

The simple multiplier is defined as:

Economists disagree on the actual size of the multiplier.

The MPC can be defined as the fraction of a:

If the inflation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is:

-Refer to the above diagram. The APC diminishes as income increases for:

If the MPC is constant at various levels of income, then the APC must also be constant at all of these income levels.

The wealth effect will tend to decrease consumption and increase saving.

The immediate determinants of investment spending are the:

Refer to the data below. When plotted on a graph, the vertical intercept of the consumption schedule in this economy is _____ and the slope is _____.

Assume the economy's consumption and saving schedules simultaneously shift downward. This must be the result of:

At the point where the consumption schedule intersects the 45-degree line:

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

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

Refer to the data below. When plotted on a graph, the vertical intercept of the consumption schedule in this economy is _ and the slope is _.