Question 1

Uncertainty about the future is likely to

Accepted Answer

A)  decrease current saving. 
B)  have no impact on current saving. 
C)  increase current saving. 
D)  either increase or decrease current saving. 
A)  decrease current saving. 
B)  have no impact on current saving. 
C)  increase current saving. 
D)  either increase or decrease current saving.

Question 2

If planned investment increases, equilibrium will be restored only when saving has increased by exactly the amount of the initial increase in planned investment, assuming there is no government or foreign sector.

Accepted Answer

A) True 
 B)False

Question 3

Suppose consumption is $60,000 when income is $90,000 and the MPS equals 0.25. When income increases to $100,000, consumption is

Accepted Answer

A)  $90,250. 
B)  $85,000. 
C)  $70,000. 
D)  $67,500. 
A)  $90,250. 
B)  $85,000. 
C)  $70,000. 
D)  $67,500.

Question 4

Refer to the information provided in Table 8.7 below to answer the questions that follow.
Table 8.7  
-Refer to Table 8.7. Which of the following statements is false?

Accepted Answer

A)  At output levels greater than $800 billion, there is a positive unplanned inventory change. 
B)  If aggregate output equals $1000 billion, then aggregate saving equals $100. 
C)  The MPC for this economy is 0.75. 
D)  At an output level of $400 billion, there is a $150 billion unplanned inventory decrease. 
A)  At output levels greater than $800 billion, there is a positive unplanned inventory change. 
B)  If aggregate output equals $1000 billion, then aggregate saving equals $100. 
C)  The MPC for this economy is 0.75. 
D)  At an output level of $400 billion, there is a $150 billion unplanned inventory decrease.

Question 5

If Wanda's income is reduced to zero after she loses her job, her consumption will be ________ and her saving will be ________.

Accepted Answer

A)  less than zero; less than zero 
B)  greater than zero; greater than zero 
C)  less than zero; greater than zero 
D)  greater than zero; less than zero 
A)  less than zero; less than zero 
B)  greater than zero; greater than zero 
C)  less than zero; greater than zero 
D)  greater than zero; less than zero

Question 6

Refer to the information provided in Figure 8.7 below to answer the questions that follow.   Figure 8.7
-Refer to Figure 8.7. In Farley, planned investment varies inversely with income. Farley's planned investment function is represented by

Accepted Answer

A)  Panel A. 
B)  Panel B. 
C)  Panel C. 
D)  Panel D. 
A)  Panel A. 
B)  Panel B. 
C)  Panel C. 
D)  Panel D.

Question 7

If planned investment is ________ to changes in the interest rate, the planned investment schedule is horizontal.

Accepted Answer

A)  positively related 
B)  negatively related 
C)  perfectly unresponsive 
D)  perfectly responsive 
A)  positively related 
B)  negatively related 
C)  perfectly unresponsive 
D)  perfectly responsive

Question 8

Assume there is no government or foreign sector. If the MPS is 0.05, the multiplier is

Accepted Answer

A)  0.95. 
B)  10. 
C)  20. 
D)  50. 
A)  0.95. 
B)  10. 
C)  20. 
D)  50.

Question 9

If C = 1,200 + 0.8Y and I = 600, then planned saving equals planned investment at aggregate output level of

Accepted Answer

A)  6,800. 
B)  7,200. 
C)  9,000. 
D)  10,200. 
A)  6,800. 
B)  7,200. 
C)  9,000. 
D)  10,200.

Question 10

Refer to the information provided in Table 8.8 below to answer the questions that follow.
Table 8.8  
-Refer to Table 8.8. At an aggregate output level of $3,000 million, planned expenditure equals

Accepted Answer

A)  $2,800. 
B)  $3,000. 
C)  $3,600. 
D)  $4,400. 
A)  $2,800. 
B)  $3,000. 
C)  $3,600. 
D)  $4,400.

Question 11

Refer to the information provided in Figure 8.1 below to answer the questions that follow.   Figure 8.1
-Refer to Figure 8.1. This household saves ________ at an income level of $400.

Accepted Answer

A)  -$300 
B)  -$250 
C)  $0 
D)  $250 
A)  -$300 
B)  -$250 
C)  $0 
D)  $250

Question 12

Using the saving/investment approach to equilibrium, the equilibrium condition can be written as

Accepted Answer

A)  C + I = C + S. 
B)  C = S + I. 
C)  C - S = I. 
D)  C + S = I. 
A)  C + I = C + S. 
B)  C = S + I. 
C)  C - S = I. 
D)  C + S = I.

Question 13

Refer to the information provided in Table 8.10 below to answer the questions that follow.
Table 8.10  
-Refer to Table 8.10. The MPC in this economy is

Accepted Answer

A)  0.5. 
B)  0.6. 
C)  0.75. 
D)  0.8. 
A)  0.5. 
B)  0.6. 
C)  0.75. 
D)  0.8.

Question 14

Planned aggregate expenditure equals consumption plus planned investment.

Accepted Answer

A) True 
 B)False

Question 15

Refer to the information provided in Figure 8.4 below to answer the questions that follow.   Figure 8.4
-Refer to Figure 8.4. Suppose the consumption function for C1 = 10 + 0.8Y, the consumption function that best fits C2 is

Accepted Answer

A)  C2 = 20 + 0.8Y. 
B)  C2 = 10 + 0.4Y. 
C)  C2 = 40 + 0.5Y. 
D)  C2 = 20 + 0.1Y. 
A)  C2 = 20 + 0.8Y. 
B)  C2 = 10 + 0.4Y. 
C)  C2 = 40 + 0.5Y. 
D)  C2 = 20 + 0.1Y.

Question 16

In 2016, the Isle of Lucy's planned investment was $130 billion and its actual investment was $145 billion. In 2016, the Isle of Lucy's unplanned inventory change was

Accepted Answer

A)  $15 billion. 
B)  $30 billion. 
C)  $45 billion. 
D)  $275 billion. 
A)  $15 billion. 
B)  $30 billion. 
C)  $45 billion. 
D)  $275 billion.

Question 17

If the marginal propensity to consume is 0.8, the marginal propensity to save is 8.

Accepted Answer

A) True 
 B)False

Question 18

Using the saving/investment approach, when C + I = C + S

Accepted Answer

A)  saving = zero. 
B)  saving = income. 
C)  income = consumption. 
D)  the market is in equilibrium. 
A)  saving = zero. 
B)  saving = income. 
C)  income = consumption. 
D)  the market is in equilibrium.

Question 19

Refer to the information provided in Figure 8.4 below to answer the questions that follow.   Figure 8.4
-Refer to Figure 8.4. Which consumption function implies the smallest MPS?

Accepted Answer

A)  C1 
B)  C2 
C)  C3 
D)  cannot be determined from the figure 
A)  C1 
B)  C2 
C)  C3 
D)  cannot be determined from the figure

Question 20

Household income is ________ related to consumption and ________ related to household saving.

Accepted Answer

A)  positively; positively 
B)  positively; negatively 
C)  negatively; positively 
D)  negatively; negatively 
A)  positively; positively 
B)  positively; negatively 
C)  negatively; positively 
D)  negatively; negatively

Exam 8: Aggregate Expenditure and Equilibrium Output

Uncertainty about the future is likely to

If planned investment increases, equilibrium will be restored only when saving has increased by exactly the amount of the initial increase in planned investment, assuming there is no government or foreign sector.

Suppose consumption is $60,000 when income is $90,000 and the MPS equals 0.25. When income increases to $100,000, consumption is

Refer to the information provided in Table 8.7 below to answer the questions that follow. Table 8.7 -Refer to Table 8.7. Which of the following statements is false?

If Wanda's income is reduced to zero after she loses her job, her consumption will be ________ and her saving will be ________.

Refer to the information provided in Figure 8.7 below to answer the questions that follow. Figure 8.7 -Refer to Figure 8.7. In Farley, planned investment varies inversely with income. Farley's planned investment function is represented by

If planned investment is ________ to changes in the interest rate, the planned investment schedule is horizontal.

Assume there is no government or foreign sector. If the MPS is 0.05, the multiplier is

If C = 1,200 + 0.8Y and I = 600, then planned saving equals planned investment at aggregate output level of

Refer to the information provided in Table 8.8 below to answer the questions that follow. Table 8.8 -Refer to Table 8.8. At an aggregate output level of $3,000 million, planned expenditure equals

Refer to the information provided in Figure 8.1 below to answer the questions that follow. Figure 8.1 -Refer to Figure 8.1. This household saves ________ at an income level of $400.

Using the saving/investment approach to equilibrium, the equilibrium condition can be written as

Refer to the information provided in Table 8.10 below to answer the questions that follow. Table 8.10 -Refer to Table 8.10. The MPC in this economy is

Planned aggregate expenditure equals consumption plus planned investment.

Refer to the information provided in Figure 8.4 below to answer the questions that follow. Figure 8.4 -Refer to Figure 8.4. Suppose the consumption function for C1 = 10 + 0.8Y, the consumption function that best fits C2 is

In 2016, the Isle of Lucy's planned investment was $130 billion and its actual investment was $145 billion. In 2016, the Isle of Lucy's unplanned inventory change was

If the marginal propensity to consume is 0.8, the marginal propensity to save is 8.

Using the saving/investment approach, when C + I = C + S

Refer to the information provided in Figure 8.4 below to answer the questions that follow. Figure 8.4 -Refer to Figure 8.4. Which consumption function implies the smallest MPS?

Household income is ________ related to consumption and ________ related to household saving.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

If Wanda's income is reduced to zero after she loses her job, her consumption will be and her saving will be .

Refer to the information provided in Figure 8.4 below to answer the questions that follow. Figure 8.4 -Refer to Figure 8.4. Suppose the consumption function for C₁ = 10 + 0.8Y, the consumption function that best fits C₂ is

Household income is related to consumption and related to household saving.