Question 1

As disposable income increases, consumption:

Accepted Answer

A)  and saving both increase. 
B)  and saving both decrease. 
C)  decreases and saving increases. 
D)  increases and saving decreases. 
A)  and saving both increase. 
B)  and saving both decrease. 
C)  decreases and saving increases. 
D)  increases and saving decreases.

Question 2

If the consumption schedule is linear, then the:

Accepted Answer

A)  saving schedule will also be linear. 
B)  MPS will decline as income rises. 
C)  MPC will decline as income rises. 
D)  APC will be constant at all levels of income. 
A)  saving schedule will also be linear. 
B)  MPS will decline as income rises. 
C)  MPC will decline as income rises. 
D)  APC will be constant at all levels of income.

Question 3

Assume the saving schedule for a private closed economy is S = -20 + 0.2Y, where S is saving and Y is gross domestic product. The multiplier for this economy:

Accepted Answer

A)  is 3. 
B)  is 4. 
C)  is 5. 
D)  cannot be determined from the information given. 
A)  is 3. 
B)  is 4. 
C)  is 5. 
D)  cannot be determined from the information given.

Question 4

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

Accepted Answer

A)  the availability of excess productive capacity. 
B)  an increase in business taxes. 
C)  businesses becoming more optimistic with respect to future business conditions. 
D)  an increase in the real interest rate. 
A)  the availability of excess productive capacity. 
B)  an increase in business taxes. 
C)  businesses becoming more optimistic with respect to future business conditions. 
D)  an increase in the real interest rate.

Question 5

-The above schedule indicates that if the real interest rate is 8 percent, then:

Accepted Answer

A)  we cannot tell what volume of investment will be profitable. 
B)  $30 billion will be both saved and invested. 
C)  $30 billion of investment will be undertaken. 
D)  $60 billion of investment will be undertaken. 
A)  we cannot tell what volume of investment will be profitable. 
B)  $30 billion will be both saved and invested. 
C)  $30 billion of investment will be undertaken. 
D)  $60 billion of investment will be undertaken.

Question 6

The following table illustrates the multiplier process in a private closed economy:
  
-Refer to the above table. The marginal propensity to consume is:

Accepted Answer

A)  .5. 
B)  .8. 
C)  .75. 
D)  .9. 
A)  .5. 
B)  .8. 
C)  .75. 
D)  .9.

Question 7

Given the expected rate of return on all possible investment opportunities in the economy:

Accepted Answer

A)  an increase in the real rate of interest will reduce the level of investment. 
B)  a decrease in the real rate of interest will reduce the level of investment. 
C)  a change in the real interest rate will have no impact upon the level of investment. 
D)  an increase in the real interest rate will increase the level of investment. 
A)  an increase in the real rate of interest will reduce the level of investment. 
B)  a decrease in the real rate of interest will reduce the level of investment. 
C)  a change in the real interest rate will have no impact upon the level of investment. 
D)  an increase in the real interest rate will increase the level of investment.

Question 8

The size of the simple multiplier is equal to the:

Accepted Answer

A)  slope of the consumption schedule. 
B)  reciprocal of the slope of the consumption schedule. 
C)  slope of the saving schedule. 
D)  reciprocal of the slope of the saving schedule. 
A)  slope of the consumption schedule. 
B)  reciprocal of the slope of the consumption schedule. 
C)  slope of the saving schedule. 
D)  reciprocal of the slope of the saving schedule.

Question 9

When we draw an investment demand curve we hold constant all of the following except:

Accepted Answer

A)  the expected rate of return from the investment. 
B)  the interest rate. 
C)  business taxes. 
D)  the present stock of capital goods. 
A)  the expected rate of return from the investment. 
B)  the interest rate. 
C)  business taxes. 
D)  the present stock of capital goods.

Question 10

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 consume in economy (1):

Accepted Answer

A)  is .5. 
B)  is .3. 
C)  is .8. 
D)  is .7. 
A)  is .5. 
B)  is .3. 
C)  is .8. 
D)  is .7.

Question 11

The relationship between the real interest rate and investment is shown by the:

Accepted Answer

A)  investment-demand schedule. 
B)  consumption of fixed capital schedule. 
C)  saving schedule. 
D)  aggregate supply curve. 
A)  investment-demand schedule. 
B)  consumption of fixed capital schedule. 
C)  saving schedule. 
D)  aggregate supply curve.

Question 12

If the marginal propensity to consume is .9, then the marginal propensity to save must be:

Accepted Answer

A)  1. 
B)  .1. 
C)  1.1. 
D)  .9. 
A)  1. 
B)  .1. 
C)  1.1. 
D)  .9.

Question 13

-Refer to the above diagram. The average propensity to consume:

Accepted Answer

A)  is greater than 1 at all levels of disposable income above $100. 
B)  is greater than 1 at all levels of disposable income below $100. 
C)  is equal to the average propensity to save. 
D)  cannot be determined from the information given. 
A)  is greater than 1 at all levels of disposable income above $100. 
B)  is greater than 1 at all levels of disposable income below $100. 
C)  is equal to the average propensity to save. 
D)  cannot be determined from the information given.

Question 14

The following table illustrates the multiplier process in a private closed economy:
  
-Refer to the above table. The multiplier in this economy is:

Accepted Answer

A)  2. 
B)  4. 
C)  5. 
D)  10. 
A)  2. 
B)  4. 
C)  5. 
D)  10.

Question 15

The following table illustrates the multiplier process in a private closed economy:
  
-Refer to the above table. The total change in income resulting from the initial change in investment will be:

Accepted Answer

A)  $100. 
B)  $20. 
C)  $80. 
D)  $200. 
A)  $100. 
B)  $20. 
C)  $80. 
D)  $200.

Question 16

For all levels of income to the left of the intersection of the 45-degree line and the consumption schedule, the APC is:

Accepted Answer

A)  greater than 100 percent. 
B)  less than the APS. 
C)  equal to the MPC. 
D)  equal to 100 percent. 
A)  greater than 100 percent. 
B)  less than the APS. 
C)  equal to the MPC. 
D)  equal to 100 percent.

Question 17

Which one of the following will cause a movement up along an economy's saving schedule?

Accepted Answer

A)  an increase in household debt outstanding 
B)  an increase in disposable income 
C)  an increase in stock prices 
D)  an increase in interest rates 
A)  an increase in household debt outstanding 
B)  an increase in disposable income 
C)  an increase in stock prices 
D)  an increase in interest rates

Question 18

The following table illustrates the multiplier process in a private closed economy:
  
-Refer to the above table. The total change in consumption resulting from the initial change in investment will be:

Accepted Answer

A)  $100. 
B)  $96. 
C)  $180. 
D)  $80. 
A)  $100. 
B)  $96. 
C)  $180. 
D)  $80.

Question 19

The average propensity to consume indicates the:

Accepted Answer

A)  amount by which income exceeds consumption. 
B)  relationship between a change in saving and the consequent change in consumption. 
C)  percentage of total income which will be consumed. 
D)  percentage of a change in income which will be consumed. 
A)  amount by which income exceeds consumption. 
B)  relationship between a change in saving and the consequent change in consumption. 
C)  percentage of total income which will be consumed. 
D)  percentage of a change in income which will be consumed.

Question 20

The consumption schedule relates:

Accepted Answer

A)  consumption to the level of disposable income. 
B)  saving to the level of disposable income. 
C)  disposable income to domestic income. 
D)  consumption to saving. 
A)  consumption to the level of disposable income. 
B)  saving to the level of disposable income. 
C)  disposable income to domestic income. 
D)  consumption to saving.

As disposable income increases, consumption:

If the consumption schedule is linear, then the:

Assume the saving schedule for a private closed economy is S = -20 + 0.2Y, where S is saving and Y is gross domestic product. The multiplier for this economy:

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

-The above schedule indicates that if the real interest rate is 8 percent, then:

The following table illustrates the multiplier process in a private closed economy: -Refer to the above table. The marginal propensity to consume is:

Given the expected rate of return on all possible investment opportunities in the economy:

The size of the simple multiplier is equal to the:

When we draw an investment demand curve we hold constant all of the following except:

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 consume in economy (1):

The relationship between the real interest rate and investment is shown by the:

If the marginal propensity to consume is .9, then the marginal propensity to save must be:

-Refer to the above diagram. The average propensity to consume:

The following table illustrates the multiplier process in a private closed economy: -Refer to the above table. The multiplier in this economy is:

The following table illustrates the multiplier process in a private closed economy: -Refer to the above table. The total change in income resulting from the initial change in investment will be:

For all levels of income to the left of the intersection of the 45-degree line and the consumption schedule, the APC is:

Which one of the following will cause a movement up along an economy's saving schedule?

The following table illustrates the multiplier process in a private closed economy: -Refer to the above table. The total change in consumption resulting from the initial change in investment will be:

The average propensity to consume indicates the:

The consumption schedule relates:

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Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

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Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, Surpluses, and Debt

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Interest Rates and Monetary Policy

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Exam 8: Basic Macroeconomic Relationships

As disposable income increases, consumption:

If the consumption schedule is linear, then the:

Assume the saving schedule for a private closed economy is S = -20 + 0.2Y, where S is saving and Y is gross domestic product. The multiplier for this economy:

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

-The above schedule indicates that if the real interest rate is 8 percent, then:

The following table illustrates the multiplier process in a private closed economy: -Refer to the above table. The marginal propensity to consume is:

Given the expected rate of return on all possible investment opportunities in the economy:

The size of the simple multiplier is equal to the:

When we draw an investment demand curve we hold constant all of the following except:

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 consume in economy (1):

The relationship between the real interest rate and investment is shown by the:

If the marginal propensity to consume is .9, then the marginal propensity to save must be:

-Refer to the above diagram. The average propensity to consume:

The following table illustrates the multiplier process in a private closed economy: -Refer to the above table. The multiplier in this economy is:

The following table illustrates the multiplier process in a private closed economy: -Refer to the above table. The total change in income resulting from the initial change in investment will be:

For all levels of income to the left of the intersection of the 45-degree line and the consumption schedule, the APC is:

Which one of the following will cause a movement up along an economy's saving schedule?

The following table illustrates the multiplier process in a private closed economy: -Refer to the above table. The total change in consumption resulting from the initial change in investment will be:

The average propensity to consume indicates the:

The consumption schedule relates:

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

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