Question 1

Which of the following equations correctly represents the data below? d = 40 + .6C B) C = 60 + .4Yd C) C = 40 + .6Yd D) C = .6Yd" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  Yd = 40 + .6C
B)  C = 60 + .4Yd
C)  C = 40 + .6Yd
D)  C = .6YdE) B) and C)
F) A) and D)

Question 2

Refer to the consumption schedules shown in the above diagram for economies 1, 2, 3, and 4.Other things equal, which economy embodies the greatest degree of macroeconomic stability?

Accepted Answer

A)  1
B)  2
C)  3
D)  4E) A) and D)
F) None of the above

Question 3

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.E) A) and C)
F) B) and D)

Question 4

Suppose a family's consumption exceeds its disposable income.This means that its:

Accepted Answer

A)  MPC is greater than 1.
B)  MPS is negative.
C)  APC is greater than 1.
D)  APS is positive.E) B) and C)
F) A) and C)

Question 5

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.E) All of the above
F) C) and D)

Question 6

The most important determinant of consumer spending is:

Accepted Answer

A)  the level of household debt.
B)  consumer expectations.
C)  the stock of wealth.
D)  the level of disposable income.E) All of the above
F) A) and D)

Question 7

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 data below.Suppose the consumption is increased by $2 billion in each of the three economies.This change could have been caused by:

Accepted Answer

A)  a decrease in consumer wealth.
B)  expectations of higher future income.
C)  an increase in taxation.
D)  an increase in saving.E) B) and C)
F) None of the above

Question 8

The investment-demand curve suggests:

Accepted Answer

A)  that the amount invested will not be affected by changes in the real interest rate.
B)  an inverse relationship between the real rate of interest and the level of investment spending.
C)  that an increase in business taxes will tend to stimulate investment spending.
D)  a direct relationship between the real rate of interest and the level of investment spending.E) A) and B)
F) A) and C)

Question 9

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)  10E) A) and B)
F) A) and D)

Question 10

Other things equal, if the real interest rate falls and business taxes rise:

Accepted Answer

A)  investment will rise until it is equal to saving.
B)  we will be uncertain as to the resulting change in investment.
C)  we can be certain that investment will rise.
D)  we can be certain that investment will fall.E) C) and D)
F) B) and C)

Question 11

If business taxes are reduced and the real interest rate increases:

Accepted Answer

A)  consumption and saving will necessarily increase.
B)  the level of investment spending might either increase or decrease.
C)  the level of investment spending will necessarily increase.
D)  the level of investment spending will necessarily decrease.E) All of the above
F) A) and B)

Question 12

d = -20 + .8S. B) Yd = 20 + .2S. C) S = 20 + .8Yd. D) S = -20 + .2Yd." class="answers-bank-image d-inline" rel="preload" > The equation for the above saving schedule is:

Accepted Answer

A)  Yd = -20 + .8S.
B)  Yd = 20 + .2S.
C)  S = 20 + .8Yd.
D)  S = -20 + .2Yd.E) All of the above
F) None of the above

Question 13

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 supplyE) A) and C)
F) None of the above

Question 14

If the marginal propensity to consume is 0.9 in a private closed economy, a $20 billion decline in investment spending will decrease:

Accepted Answer

A)  GDP by $20 billion.
B)  GDP by $100 billion.
C)  saving by $20 billion.
D)  consumption by $200 billion.E) C) and D)
F) All of the above

Question 15

The simple multiplier is:

Accepted Answer

A)  1/MPC.
B)  1/(1 + MP
C)  .
C)  1/MPS.
D)  1/(1 - MPS) .E) None of the above
F) B) and C)

Question 16

The multiplier effect:

Accepted Answer

A)  reduces the MPC.
B)  magnifies small changes in spending into larger changes in output and income.
C)  promotes stability of the general price level.
D)  lessens upswings and downswings in business activity.E) C) and D)
F) All of the above

Question 17

The simple multiplier:

Accepted Answer

A)  occurs only in response to a change in the level of investment spending.
B)  can be found by taking the reciprocal of the MPS.
C)  occurs only when intended investment increases as GDP increases.
D)  is measured by the slope of the saving schedule.E) B) and D)
F) B) and C)

Question 18

Refer to the above data.The marginal propensity to consume is:

Accepted Answer

A)  .80.
B)  .75.
C)  .20.
D)  .25.E) A) and B)
F) A) and C)

Question 19

If a consumption schedule shifts upward, this means that the:

Accepted Answer

A)  MPC has increased.
B)  MPS has decreased.
C)  APC is now higher at each level of disposable income.
D)  APC is now lower at each level of disposable income.E) B) and C)
F) All of the above

Question 20

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)  $200E) C) and D)
F) None of the above

Exam 10: Part B: Basic Macroeconomic Relationships

Other things equal, if the real interest rate falls and business taxes rise:

Correct Answer
verified

The most important determinant of consumer spending is:

Correct Answer
verified

If the marginal propensity to consume is 0.9 in a private closed economy, a $20 billion decline in investment spending will decrease:

Correct Answer
verified

Suppose a family's consumption exceeds its disposable income.This means that its:

Correct Answer
verified

The investment-demand curve suggests:

Correct Answer
verified

The multiplier effect:

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

If a consumption schedule shifts upward, this means that the:

Correct Answer
verified

The simple multiplier is:

Correct Answer
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The simple multiplier:

Correct Answer
verified

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

Correct Answer
verified

As disposable income increases, consumption:

Correct Answer
verified

The equation for the above saving schedule is:

Correct Answer
verified

Which of the following equations correctly represents the data below?

Correct Answer
verified

If business taxes are reduced and the real interest rate increases:

Correct Answer
verified

Refer to the consumption schedules shown in the above diagram for economies 1, 2, 3, and 4.Other things equal, which economy embodies the greatest degree of macroeconomic stability?

Correct Answer
verified

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:

Correct Answer
verified

Refer to the above data.The marginal propensity to consume is:

Correct Answer
verified

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:

Correct Answer
verified

Exam 10: Part B: Basic Macroeconomic Relationships

Other things equal, if the real interest rate falls and business taxes rise:

Correct AnswerverifiedShow Answer

The most important determinant of consumer spending is:

Correct AnswerverifiedShow Answer

If the marginal propensity to consume is 0.9 in a private closed economy, a $20 billion decline in investment spending will decrease:

Correct AnswerverifiedShow Answer

Suppose a family's consumption exceeds its disposable income.This means that its:

Correct AnswerverifiedShow Answer

The investment-demand curve suggests:

Correct AnswerverifiedShow Answer

The multiplier effect:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a consumption schedule shifts upward, this means that the:

Correct AnswerverifiedShow Answer

The simple multiplier is:

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The simple multiplier:

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

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As disposable income increases, consumption:

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The equation for the above saving schedule is:

Correct AnswerverifiedShow Answer

Which of the following equations correctly represents the data below?

Correct AnswerverifiedShow Answer

If business taxes are reduced and the real interest rate increases:

Correct AnswerverifiedShow Answer

Refer to the consumption schedules shown in the above diagram for economies 1, 2, 3, and 4.Other things equal, which economy embodies the greatest degree of macroeconomic stability?

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Refer to the above data.The marginal propensity to consume is:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

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