Question 1

Which of the following relations is not correct?

Accepted Answer

A)   1 - MPC = MPS
B)   MPS = MPC + 1
C)   APS + APC = 1
D)   MPC + MPS = 1E) A) and B)
F) C) and D)

Question 2

The following table illustrates the multiplier process in a private closed economy:
 
-Refer to the above table.The change in income in round two will be:

Accepted Answer

A)   $4
B)   $16
C)   $20
D)   $24E) A) and D)
F) C) and D)

Question 3

The consumption schedule shows:

Accepted Answer

A)   that the MPC increases in proportion to GDP.
B)   that households consume more when interest rates are low.
C)   that consumption depends primarily upon the level of business investment.
D)   the amounts households plan or intend to consume at various possible levels of aggregate income.E) None of the above
F) C) and D)

Question 4

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.At an income level of $400 billion,the average propensity to save in economy (2) is:

Accepted Answer

A)   .9125.
B)   .0725.
C)   .0875.
D)   .9305.E) A) and D)
F) B) and C)

Question 5

The greater the MPC,the greater the multiplier.

Accepted Answer

A) True 
 B)False

Question 6

At the point where the consumption schedule intersects the 45-degree line:

Accepted Answer

A)   the MPC is 1.00.
B)   the APC is 1.00.
C)   saving is equal to consumption.
D)   the economy is in equilibrium.E) A) and B)
F) B) and C)

Question 7

A decline in the real interest rate will:

Accepted Answer

A)   increase the amount of investment spending.
B)   shift the investment schedule downward.
C)   shift the investment-demand curve to the right.
D)   shift the investment-demand curve to the left.E) B) and C)
F) C) and D)

Question 8

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) None of the above
F) B) and D)

Question 9

Refer to the data below.When plotted on a graph,the vertical intercept of the consumption schedule in this economy is _____ and the slope is _____.

Accepted Answer

A)   -2;1
B)   $2;.18
C)   $100;.5
D)   $2;.9E) A) and D)
F) All of the above

Question 10

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) A) and B)
F) A) and C)

Question 11

If the nominal interest rate is 18 percent and the real interest rate is 6 percent,the inflation rate is:

Accepted Answer

A)   18 percent.
B)   24 percent.
C)   12 percent.
D)   6 percent.E) A) and C)
F) B) and C)

Question 12

If the saving schedule is a straight line,the:

Accepted Answer

A)   MPS must be constant.
B)   APS must be constant.
C)   APC must be constant.
D)   MPC must be rising.E) B) and D)
F) C) and D)

Question 13

The multiplier effect means that:

Accepted Answer

A)   consumption is typically several times as large as saving.
B)   a small change in consumption demand can cause a much larger increase in investment.
C)   a small decline in the MPC can cause equilibrium GDP to rise by several times that amount.
D)   a small increase in investment can cause national income to change by a larger amount.E) None of the above
F) B) and C)

Question 14

-The above table reflects a(n) :

Accepted Answer

A)   interest rate schedule.
B)   demand-for-money schedule.
C)   investment-demand schedule.
D)   profit schedule.E) All of the above
F) None of the above

Question 15

As aggregate income decreases,the APC:

Accepted Answer

A)   and APS will both increase.
B)   will decrease,but the APS will increase.
C)   will increase,but the APS will decrease.
D)   and APS will both decrease.E) A) and C)
F) A) and B)

Question 16

3 only. C)  C1,and C2. D)  C4 only." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram.The APC diminishes as income increases for:

Accepted Answer

A)   none of the consumption schedules shown.
B)   C3 only.
C)   C1,and C2.
D)   C4 only.E) C) and D)
F) B) and C)

Question 17

3 only. C)  C3 and C4 only. D)  C1 and C2 only." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram.The MPC and APC are both constant as income increases for:

Accepted Answer

A)   none of the consumption schedules shown.
B)   C3 only.
C)   C3 and C4 only.
D)   C1 and C2 only.E) B) and C)
F) C) and D)

Question 18

If DI is $275 billion and the APC is 0.8,it can be concluded that saving is $55 billion.

Accepted Answer

A) True 
 B)False

Question 19

The average propensity to consume can be defined as income divided by consumption.

Accepted Answer

A) True 
 B)False

Question 20

Suppose the consumption schedule is: C = 20 + .9Y,where C is consumption and Y is disposable income.
-Refer to the above data.The MPC is:

Accepted Answer

A)   .45.
B)   .20.
C)   .50.
D)   .90.E) A) and B)
F) A) and C)

Exam 10: Basic Macroeconomic Relationships

The consumption schedule shows:

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If the nominal interest rate is 18 percent and the real interest rate is 6 percent,the inflation rate is:

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As aggregate income decreases,the APC:

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Refer to the data below.When plotted on a graph,the vertical intercept of the consumption schedule in this economy is _____ and the slope is _____.

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If the saving schedule is a straight line,the:

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Which of the following relations is not correct?

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Suppose the consumption schedule is: C = 20 + .9Y,where C is consumption and Y is disposable income. -Refer to the above data.The MPC is:

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-Refer to the above diagram.The APC diminishes as income increases for:

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At the point where the consumption schedule intersects the 45-degree line:

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The following table illustrates the multiplier process in a private closed economy: -Refer to the above table.The change in income in round two will be:

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The multiplier effect means that:

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The most important determinant of consumer spending is:

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-The above table reflects a(n) :

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

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A decline in the real interest rate will:

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The greater the MPC,the greater the multiplier.

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-Refer to the above diagram.The MPC and APC are both constant as income increases for:

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If DI is $275 billion and the APC is 0.8,it can be concluded that saving is $55 billion.

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The average propensity to consume can be defined as income divided by consumption.

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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.At an income level of $400 billion,the average propensity to save in economy (2) is:

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Refer to the data below.When plotted on a graph,the vertical intercept of the consumption schedule in this economy is _ and the slope is _.

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