Question 1

The figure given below shows the consumption function of a household. Figure 9.2   In Figure 9.2, consumption equals disposable income:

Accepted Answer

A) at point A only. 
B) at point B only. 
C) at point C only. 
D) at points A and C only. 
E) at all points on the consumption function. 
A) at point A only. 
B) at point B only. 
C) at point C only. 
D) at points A and C only. 
E) at all points on the consumption function.

Question 2

Which of the following will cause the net export function to shift?

Accepted Answer

A) A change in real GDP 
B) An increase in government spending 
C) An increase in investment spending 
D) A change in the exchange rate 
E) A change in the domestic interest rate 
A) A change in real GDP 
B) An increase in government spending 
C) An increase in investment spending 
D) A change in the exchange rate 
E) A change in the domestic interest rate

Question 3

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.The intercept of the C+ I+ G+ X function is at an aggregate expenditures level of:

Accepted Answer

A) $125. 
B) $150. 
C) $275. 
D) $315. 
E) $335. 
A) $125. 
B) $150. 
C) $275. 
D) $315. 
E) $335.

Question 4

Other things equal, an increase in the consumer confidence index tends to raise the average propensity to consume.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is true?

Accepted Answer

A) Real GDP is a positive function of net exports. 
B) In the 1980s, the United States experienced a large trade surplus with Japan. 
C) Positive net exports mean that the domestic country imports more than it exports. 
D) Total U.S.net exports with Western Europe are zero. 
E) U.S.net exports are negative because of large trade deficits with other industrial nations. 
A) Real GDP is a positive function of net exports. 
B) In the 1980s, the United States experienced a large trade surplus with Japan. 
C) Positive net exports mean that the domestic country imports more than it exports. 
D) Total U.S.net exports with Western Europe are zero. 
E) U.S.net exports are negative because of large trade deficits with other industrial nations.

Question 6

The second-largest component of aggregate expenditures in the United States is _____.

Accepted Answer

A) consumption. 
B) investment 
C) government expenditure 
D) imports 
E) exports 
A) consumption. 
B) investment 
C) government expenditure 
D) imports 
E) exports

Question 7

In the country of Marzipana, total consumption in Year 1 was $56, 000 million and in Year 2 was 60, 000 million.It has been observed that each time disposable income changes in this country by $100, consumption changes by $70.Using this information compute the change in disposable income from Year 1 to Year 2.

Accepted Answer

A) Disposable income increased by $2, 800 million in Year 2. 
B) Disposable income decreased by $2, 000 million in Year 2. 
C) Disposable income increased by $2, 000 million in Year 2. 
D) Disposable income increased by $4, 500 million in Year 2. 
E) Disposable income decreased by $2, 600 million in Year 2. 
A) Disposable income increased by $2, 800 million in Year 2. 
B) Disposable income decreased by $2, 000 million in Year 2. 
C) Disposable income increased by $2, 000 million in Year 2. 
D) Disposable income increased by $4, 500 million in Year 2. 
E) Disposable income decreased by $2, 600 million in Year 2.

Question 8

If disposable income rises from $15, 000 to $20, 000 and the marginal propensity to consume equals 0.9, then saving must increase by $500.

Accepted Answer

A) True 
 B)False

Question 9

Suppose the Kwik Print Company considers an investment project that involves the purchase of a copier with an expected output of $4, 000.If the firm has to borrow $3, 000 and the rate of return is 11.1 percent, then the interest rate associated with the loan must be 20 percent.

Accepted Answer

A) True 
 B)False

Question 10

Dissaving occurs when:

Accepted Answer

A) disposable income is greater than consumption. 
B) consumption is greater than disposable income. 
C) consumption is equal to disposable income. 
D) consumption is greater than personal income. 
E) consumption is less than personal income. 
A) disposable income is greater than consumption. 
B) consumption is greater than disposable income. 
C) consumption is equal to disposable income. 
D) consumption is greater than personal income. 
E) consumption is less than personal income.

Question 11

Investment is considered to be positively correlated with current real GDP.

Accepted Answer

A) True 
 B)False

Question 12

The sum of consumption and saving is called _____.

Accepted Answer

A) net investment 
B) net income 
C) personal income 
D) disposable income 
E) transfer income 
A) net investment 
B) net income 
C) personal income 
D) disposable income 
E) transfer income

Question 13

Suppose two successive levels of disposable personal income are $16 and $21 billion, respectively, and the change in consumption spending between these two levels of disposable personal income is $2 billion, then the MPC will equal _____.

Accepted Answer

A) 0.12 
B) 0.8 
C) 0.7 
D) 0.4 
E) 0.04 
A) 0.12 
B) 0.8 
C) 0.7 
D) 0.4 
E) 0.04

Question 14

Table 9.2   Refer to Table 9.2.If a firm purchases the machine by taking out a one-year loan, how much interest will the firm have to pay?

Accepted Answer

A) $301, 500 
B) $30, 150 
C) $270, 000 
D) $27, 000 
E) $9, 000 
A) $301, 500 
B) $30, 150 
C) $270, 000 
D) $27, 000 
E) $9, 000

Question 15

Identify the correct statement.

Accepted Answer

A) Autonomous consumption equals saving when disposable income is equal to zero. 
B) Saving is equal to consumption when autonomous consumption is zero. 
C) The savings function always has a positive intercept when autonomous consumption is positive. 
D) The consumption and saving function intersect each other when disposable income is zero. 
E) Autonomous consumption is positive even when disposable income is zero. 
A) Autonomous consumption equals saving when disposable income is equal to zero. 
B) Saving is equal to consumption when autonomous consumption is zero. 
C) The savings function always has a positive intercept when autonomous consumption is positive. 
D) The consumption and saving function intersect each other when disposable income is zero. 
E) Autonomous consumption is positive even when disposable income is zero.

Question 16

_____ is the primary determinant of consumption and is usually measured in terms of current disposable income.

Accepted Answer

A) Household income 
B) Wealth 
C) Expectation 
D) Interest rate 
E) Tax liability 
A) Household income 
B) Wealth 
C) Expectation 
D) Interest rate 
E) Tax liability

Question 17

The sum of the MPC and the MPS is always:

Accepted Answer

A) greater than 1. 
B) less than 1. 
C) equal to 1. 
D) equal to zero. 
E) between 0 and 1. 
A) greater than 1. 
B) less than 1. 
C) equal to 1. 
D) equal to zero. 
E) between 0 and 1.

Question 18

The consumption function has a positive slope while the savings function has a negative slope.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements concerning the effects of demographics on consumption is not true?

Accepted Answer

A) The size of the population affects the slope of the consumption function. 
B) The age of the population affects the slope of the consumption function. 
C) Other things equal, the level of consumption will rise with increases in population. 
D) Younger households tend to have higher MPCs than older households. 
E) Older households tend to have higher MPSs than younger households. 
A) The size of the population affects the slope of the consumption function. 
B) The age of the population affects the slope of the consumption function. 
C) Other things equal, the level of consumption will rise with increases in population. 
D) Younger households tend to have higher MPCs than older households. 
E) Older households tend to have higher MPSs than younger households.

Question 20

All of the following would cause exports to decline, except:

Accepted Answer

A) a depreciation of the domestic currency. 
B) a decline in foreign income. 
C) stricter government regulations on international trade. 
D) a decline in foreign preferences for domestic goods. 
E) foreign quotas on domestic products. 
A) a depreciation of the domestic currency. 
B) a decline in foreign income. 
C) stricter government regulations on international trade. 
D) a decline in foreign preferences for domestic goods. 
E) foreign quotas on domestic products.

Exam 13: Aggregate Expenditures

The figure given below shows the consumption function of a household. Figure 9.2 In Figure 9.2, consumption equals disposable income:

Which of the following will cause the net export function to shift?

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.The intercept of the C+ I+ G+ X function is at an aggregate expenditures level of:

Other things equal, an increase in the consumer confidence index tends to raise the average propensity to consume.

Which of the following statements is true?

The second-largest component of aggregate expenditures in the United States is _____.

If disposable income rises from $15, 000 to $20, 000 and the marginal propensity to consume equals 0.9, then saving must increase by $500.

Suppose the Kwik Print Company considers an investment project that involves the purchase of a copier with an expected output of $4, 000.If the firm has to borrow $3, 000 and the rate of return is 11.1 percent, then the interest rate associated with the loan must be 20 percent.

Dissaving occurs when:

Investment is considered to be positively correlated with current real GDP.

The sum of consumption and saving is called _____.

Suppose two successive levels of disposable personal income are $16 and $21 billion, respectively, and the change in consumption spending between these two levels of disposable personal income is $2 billion, then the MPC will equal _____.

Table 9.2 Refer to Table 9.2.If a firm purchases the machine by taking out a one-year loan, how much interest will the firm have to pay?

Identify the correct statement.

_____ is the primary determinant of consumption and is usually measured in terms of current disposable income.

The sum of the MPC and the MPS is always:

The consumption function has a positive slope while the savings function has a negative slope.

Which of the following statements concerning the effects of demographics on consumption is not true?

All of the following would cause exports to decline, except:

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