Question 1

An increase in disposable income will cause autonomous consumption to rise.

Accepted Answer

A) True 
 B)False

Question 2

Economists have proved that a substantial increase in income during a month does not affect consumption much in the short run unless it is perceived as a permanent increase.

Accepted Answer

A) True 
 B)False

Question 3

When the U.S.government removes investment tax credits:

Accepted Answer

A) consumption spending falls. 
B) the return on investment increases. 
C) capacity utilization in the economy expands. 
D) the cost of capital increases. 
E) technological innovation advances more rapidly. 
A) consumption spending falls. 
B) the return on investment increases. 
C) capacity utilization in the economy expands. 
D) the cost of capital increases. 
E) technological innovation advances more rapidly.

Question 4

The slope of the aggregate expenditures function (AE)is flatter than the C+I+G function because:

Accepted Answer

A) the marginal propensity to consume is ususally less than 1. 
B) the marginal propensity to import is greater than 1. 
C) the slope of the net exports function is negative. 
D) investment(I)and government spending(G)are assumed to be autonomous. 
E) there is a leakage from the aggregate expenditures function in the form of savings. 
A) the marginal propensity to consume is ususally less than 1. 
B) the marginal propensity to import is greater than 1. 
C) the slope of the net exports function is negative. 
D) investment(I)and government spending(G)are assumed to be autonomous. 
E) there is a leakage from the aggregate expenditures function in the form of savings.

Question 5

The amount of autonomous consumption in an economy is measured by the:

Accepted Answer

A) the intercept of the consumption function when disposable income is positive. 
B) the intercept of the consumption function where actual consumption is above the 45-degree line. 
C) the intercept of the consumption function when disposable income is zero. 
D) the intercept of the consumption function when disposable income is negative. 
A) the intercept of the consumption function when disposable income is positive. 
B) the intercept of the consumption function where actual consumption is above the 45-degree line. 
C) the intercept of the consumption function when disposable income is zero. 
D) the intercept of the consumption function when disposable income is negative.

Question 6

The figure given below shows the consumption function of a household. Figure 9.2   In Figure 9.2, the line segment AD represents:

Accepted Answer

A) autonomous consumption. 
B) the maximum amount of saving. 
C) negative consumption. 
D) zero consumption. 
E) autonomous income. 
A) autonomous consumption. 
B) the maximum amount of saving. 
C) negative consumption. 
D) zero consumption. 
E) autonomous income.

Question 7

Which of the following is true of long-run consumption functions?

Accepted Answer

A) Autonomous consumption is equal to zero in the long-run. 
B) The long run consumption functions are steeper than short run consumption functions. 
C) The marginal propensity to consume for the long run consumption function is almost equal to zero. 
D) The autonomous consumption is negative in long run consumption functions. 
E) The long run consumption function is represented by a straight line parallel to the horizontal axis. 
A) Autonomous consumption is equal to zero in the long-run. 
B) The long run consumption functions are steeper than short run consumption functions. 
C) The marginal propensity to consume for the long run consumption function is almost equal to zero. 
D) The autonomous consumption is negative in long run consumption functions. 
E) The long run consumption function is represented by a straight line parallel to the horizontal axis.

Question 8

The figure given below shows the consumption function of a household. Figure 9.2   In Figure 9.2, at any point to the left of point B:

Accepted Answer

A) autonomous consumption is less than zero. 
B) saving occurs. 
C) disposable income is negative 
D) consumption is greater than disposable income. 
E) autonomous consumption is zero. 
A) autonomous consumption is less than zero. 
B) saving occurs. 
C) disposable income is negative 
D) consumption is greater than disposable income. 
E) autonomous consumption is zero.

Question 9

In the table given below Y represent the aggregate expenditure of the economy on C = consumption, I = investment, G = government projects, and X = net exports. Table 9.3
  According to Table 9.3, what is the marginal propensity to import?

Accepted Answer

A) -0.20 
B) 0.40 
C) -0.50 
D) 0.75 
E) -0.80 
A) -0.20 
B) 0.40 
C) -0.50 
D) 0.75 
E) -0.80

Question 10

The table given below reports the consumption expenditure of a nation at different levels of disposable income. Table 9.1
  Refer to Table 9.1.At an income level of $45, 000, the average propensity to save would equal:

Accepted Answer

A) 0.15. 
B) 0.75. 
C) 0.25. 
D) 0.20. 
E) 0.80. 
A) 0.15. 
B) 0.75. 
C) 0.25. 
D) 0.20. 
E) 0.80.

Question 11

Keynesian economics developed in response to:

Accepted Answer

A) the Great Depression of the 1930s. 
B) the inflation following World War II. 
C) economic growth during the 1950s. 
D) the Vietnam War. 
E) the oil embargo in the 1970s. 
A) the Great Depression of the 1930s. 
B) the inflation following World War II. 
C) economic growth during the 1950s. 
D) the Vietnam War. 
E) the oil embargo in the 1970s.

Question 12

Consumption, saving, and wealth all represent stock concepts because they are measured over a period of time.

Accepted Answer

A) True 
 B)False

Question 13

In the table given below Y represent the aggregate expenditure of the economy on C = consumption, I = investment, G = government projects, and X = net exports. Table 9.3
  Refer to Table 9.3.Calculate the marginal propensity to consume in the economy.

Accepted Answer

A) 0.25 
B) 0.50 
C) 0.75 
D) 0.80 
E) 1.25 
A) 0.25 
B) 0.50 
C) 0.75 
D) 0.80 
E) 1.25

Question 14

The table given below reports the consumption expenditure of a nation at different levels of disposable income. Table 9.1
  Refer to Table 9.1.Autonomous consumption expenditure in this nation will equal:

Accepted Answer

A) $10, 000. 
B) $5, 500. 
C) $4, 500. 
D) $3, 000. 
E) $4, 000. 
A) $10, 000. 
B) $5, 500. 
C) $4, 500. 
D) $3, 000. 
E) $4, 000.

Question 15

The consumer confidence index can be defined as:

Accepted Answer

A) an economic index that measures how consumers feel about their government. 
B) an economic index that measures how confident companies are about keeping their current consumers. 
C) an economic index that measures household expectations about the economy. 
D) an index that measures how investors feel about their investments in the stock market. 
E) an economic index used to measure consumers' confidence on a particular brand. 
A) an economic index that measures how consumers feel about their government. 
B) an economic index that measures how confident companies are about keeping their current consumers. 
C) an economic index that measures household expectations about the economy. 
D) an index that measures how investors feel about their investments in the stock market. 
E) an economic index used to measure consumers' confidence on a particular brand.

Question 16

Table 9.2   Refer to Table 9.2.If a firm purchases the machine by taking out a one-year loan, what is the firm's profit from the investment?

Accepted Answer

A) $25, 500 
B) $35, 000 
C) $8, 000 
D) $0 
E) $6, 525 
A) $25, 500 
B) $35, 000 
C) $8, 000 
D) $0 
E) $6, 525

Question 17

The figure given below represents the consumption function of a country. Figure 9.3   According to Figure 9.3, saving is zero when disposable income is _____.

Accepted Answer

A) $0 
B) $400 
C) $250 
D) $800 
E) $300 
A) $0 
B) $400 
C) $250 
D) $800 
E) $300

Question 18

Other things equal, when the U.S.dollar depreciates, domestic exports rise at every level of domestic income.

Accepted Answer

A) True 
 B)False

Question 19

Other things equal, a decrease in the cost of capital would be associated with an upward shift of the investment function and, hence, with a rise in aggregate expenditures.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following variables do not change autonomous consumption?

Accepted Answer

A) Demographics 
B) Taxation 
C) Expectation 
D) Wealth 
E) Disposable income 
A) Demographics 
B) Taxation 
C) Expectation 
D) Wealth 
E) Disposable income

Exam 13: Aggregate Expenditures

An increase in disposable income will cause autonomous consumption to rise.

Economists have proved that a substantial increase in income during a month does not affect consumption much in the short run unless it is perceived as a permanent increase.

When the U.S.government removes investment tax credits:

The slope of the aggregate expenditures function (AE)is flatter than the C+I+G function because:

The amount of autonomous consumption in an economy is measured by the:

The figure given below shows the consumption function of a household. Figure 9.2 In Figure 9.2, the line segment AD represents:

Which of the following is true of long-run consumption functions?

The figure given below shows the consumption function of a household. Figure 9.2 In Figure 9.2, at any point to the left of point B:

In the table given below Y represent the aggregate expenditure of the economy on C = consumption, I = investment, G = government projects, and X = net exports. Table 9.3 According to Table 9.3, what is the marginal propensity to import?

The table given below reports the consumption expenditure of a nation at different levels of disposable income. Table 9.1 Refer to Table 9.1.At an income level of $45, 000, the average propensity to save would equal:

Keynesian economics developed in response to:

Consumption, saving, and wealth all represent stock concepts because they are measured over a period of time.

In the table given below Y represent the aggregate expenditure of the economy on C = consumption, I = investment, G = government projects, and X = net exports. Table 9.3 Refer to Table 9.3.Calculate the marginal propensity to consume in the economy.

The table given below reports the consumption expenditure of a nation at different levels of disposable income. Table 9.1 Refer to Table 9.1.Autonomous consumption expenditure in this nation will equal:

The consumer confidence index can be defined as:

Table 9.2 Refer to Table 9.2.If a firm purchases the machine by taking out a one-year loan, what is the firm's profit from the investment?

The figure given below represents the consumption function of a country. Figure 9.3 According to Figure 9.3, saving is zero when disposable income is _____.

Other things equal, when the U.S.dollar depreciates, domestic exports rise at every level of domestic income.

Other things equal, a decrease in the cost of capital would be associated with an upward shift of the investment function and, hence, with a rise in aggregate expenditures.

Which of the following variables do not change autonomous consumption?

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters