Question 1

Refer to the given diagram, which shows consumption schedules for economies A and B. We can say that the

Accepted Answer

A)   MPC is greater in B than in A.
B)   APC at any given income level is greater in B than in A.
C)   MPS is smaller in B than in A.
D)   MPC is greater in A than in B.E) A) and C)
F) B) and C)

Question 2

If the consumption schedule shifts upward and the shift was not caused by a tax change, the saving schedule

Accepted Answer

A)   will not shift.
B)   may shift either upward or downward.
C)   will shift downward.
D)   will also shift upward.E) A) and C)
F) C) and D)

Question 3

Dissaving occurs where

Accepted Answer

A)   income exceeds consumption.
B)   saving exceeds consumption.
C)   consumption exceeds income.
D)   saving exceeds income.E) C) and D)
F) A) and D)

Question 4

If there is a decrease in disposable income in an economy, then

Accepted Answer

A)   both the APC and the APS rise.
B)   the APC rises and the APS falls.
C)   the APC falls and the APS rises.
D)   both the APC and the APS fall.E) None of the above
F) A) and C) B

Question 5

The slope of the consumption schedule between two points on the schedule is

Accepted Answer

A)   the ratio of the change in consumption to the change in disposable income between those two points.
B)   the ratio of the change in disposable income over the change in consumption between those two points.
C)   equivalent to one plus the marginal propensity to save.
D)   equivalent to the average propensity to consume.E) A) and B)
F) B) and C)

Question 6

(Advanced analysis)  Assume the following consumption schedule: C = 20 + 0.9Y, where C is consumption and Y is disposable income. The MPC is

Accepted Answer

A)   0.45.
B)   0.20.
C)   0.50.
D)   0.90.E) None of the above
F) C) and D)

Question 7

In an economy, for every $10 million increase in disposable income, saving increases by $2 million. It can be concluded that the

Accepted Answer

A)   slope of the saving schedule is 2.
B)   slope of the consumption schedule is 0.8.
C)   marginal propensity to consume is 0.2.
D)   average propensity to save is 0.2.E) All of the above
F) A) and D)

Question 8

If Matt's disposable income increases from $4,000 to $4,500 and his level of saving increases from $200 to $325, it may be concluded that his marginal propensity to

Accepted Answer

A)   consume is 0.80.
B)   consume is 0.75.
C)   consume is 0.60.
D)   save is 0.30.E) B) and C)
F) A) and B)

Question 9

If DI is $275 billion and the APC is 0.8, we can conclude that saving is $55 billion.

Accepted Answer

A) True 
 B)False

Question 10

If disposable income decreases from $1,800 to $1,500 and MPC = 0.75, then saving will

Accepted Answer

A)   increase by $225.
B)   decrease by $225.
C)   increase by $75.
D)   decrease by $75.E) All of the above
F) A) and B)

Question 11

Given the consumption schedule, it is possible to graph the relevant saving schedule by

Accepted Answer

A)   subtracting the MPC from 1 at each level of income.
B)   subtracting investment from consumption at each level of GDP.
C)   plotting the horizontal differences between the consumption schedule and the 45-degree line.
D)   plotting the vertical differences between the consumption schedule and the 45-degree line.E) B) and C)
F) None of the above

Question 12

In contrast to investment, consumption is

Accepted Answer

A)   relatively unstable.
B)   relatively stable.
C)   measurable.
D)   unmeasurable.E) A) and D)
F) B) and C) B

Question 13

If Trent's MPC is 0.80, this means that he will

Accepted Answer

A)   spend eight-tenths of any increase in his disposable income.
B)   spend eight-tenths of any level of disposable income.
C)   break even when his disposable income is $8,000.
D)   save two-tenths of any level of disposable income.E) B) and C)
F) None of the above

Question 14

Refer to the given graph. A shift of the consumption schedule from C1 to C2 might be caused by a(n)

Accepted Answer

A)   recession.
B)   wealth effect of an increase in stock market prices.
C)   increase in income tax rates.
D)   increase in saving.E) B) and C)
F) B) and D)

Question 15

Dissaving means

Accepted Answer

A)   the same thing as disinvesting.
B)   that households are spending more than their current incomes.
C)   that saving and investment are equal.
D)   that disposable income is less than zero.E) A) and B)
F) B) and D) B

Question 16

Refer to the diagram. Which of the following would shift the investment demand curve from ID1 to ID3?

Accepted Answer

A)   a lower interest rate
B)   lower expected rates of return on investment
C)   a higher interest rate
D)   higher expected rates of return on investmentE) A) and B)
F) All of the above

Question 17

Disposable Income  Saving $0−$10500100101502020030\begin{array} { | c | r | } \hline 	ext { Disposable Income } & 	ext { Saving } \\hline \$ 0 & - \$ 10 \\hline 50 & 0 \\hline 100 & 10 \\hline 150 & 20 \\hline 200 & 30 \\hline\end{array} Disposable Income $050100150200​ Saving −$100102030​​  Refer to the given data for a hypothetical economy. At the $100 level of income, the average propensity to save is

Accepted Answer

A)   0.10.
B)   0.20.
C)   0.25.
D)   0.90. E) A) and C)
F) All of the above

Question 18

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) B) and D)
F) A) and B)

Question 19

The investment demand curve will shift to the right as the result of

Accepted Answer

A)   the availability of excess production capacity.
B)   an increase in business taxes.
C)   businesses becoming more optimistic about future business conditions.
D)   an increase in the real interest rate.E) All of the above
F) A) and C)

Question 20

1 − MPC = MPS.

Accepted Answer

A) True 
 B)False

Exam 10: Basic Macroeconomic Relationships

Refer to the given diagram, which shows consumption schedules for economies A and B. We can say that the

Correct Answer
verified

If the consumption schedule shifts upward and the shift was not caused by a tax change, the saving schedule

Correct Answer
verified

Dissaving occurs where

Correct Answer
verified

If there is a decrease in disposable income in an economy, then

Correct Answer
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B

The slope of the consumption schedule between two points on the schedule is

Correct Answer
verified

(Advanced analysis) Assume the following consumption schedule: C = 20 + 0.9Y, where C is consumption and Y is disposable income. The MPC is

Correct Answer
verified

In an economy, for every $10 million increase in disposable income, saving increases by $2 million. It can be concluded that the

Correct Answer
verified

If Matt's disposable income increases from $4,000 to $4,500 and his level of saving increases from $200 to $325, it may be concluded that his marginal propensity to

Correct Answer
verified

If DI is $275 billion and the APC is 0.8, we can conclude that saving is $55 billion.

Correct Answer
verified

If disposable income decreases from $1,800 to $1,500 and MPC = 0.75, then saving will

Correct Answer
verified

Given the consumption schedule, it is possible to graph the relevant saving schedule by

Correct Answer
verified

In contrast to investment, consumption is

Correct Answer
verified
B

If Trent's MPC is 0.80, this means that he will

Correct Answer
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Refer to the given graph. A shift of the consumption schedule from C1 to C2 might be caused by a(n)

Correct Answer
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Dissaving means

Correct Answer
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B

Refer to the diagram. Which of the following would shift the investment demand curve from ID1 to ID3?

Correct Answer
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If business taxes are reduced and the real interest rate increases,

Correct Answer
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The investment demand curve will shift to the right as the result of

Correct Answer
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1 − MPC = MPS.

Correct Answer
verified

Exam 10: Basic Macroeconomic Relationships

Refer to the given diagram, which shows consumption schedules for economies A and B. We can say that the

Correct AnswerverifiedShow Answer

If the consumption schedule shifts upward and the shift was not caused by a tax change, the saving schedule

Correct AnswerverifiedShow Answer

Dissaving occurs where

Correct AnswerverifiedShow Answer

If there is a decrease in disposable income in an economy, then

Correct AnswerverifiedB

The slope of the consumption schedule between two points on the schedule is

Correct AnswerverifiedShow Answer

(Advanced analysis) Assume the following consumption schedule: C = 20 + 0.9Y, where C is consumption and Y is disposable income. The MPC is

Correct AnswerverifiedShow Answer

In an economy, for every $10 million increase in disposable income, saving increases by $2 million. It can be concluded that the

Correct AnswerverifiedShow Answer

If Matt's disposable income increases from $4,000 to $4,500 and his level of saving increases from $200 to $325, it may be concluded that his marginal propensity to

Correct AnswerverifiedShow Answer

If DI is $275 billion and the APC is 0.8, we can conclude that saving is $55 billion.

Correct AnswerverifiedShow Answer

If disposable income decreases from $1,800 to $1,500 and MPC = 0.75, then saving will

Correct AnswerverifiedShow Answer

Given the consumption schedule, it is possible to graph the relevant saving schedule by

Correct AnswerverifiedShow Answer

In contrast to investment, consumption is

Correct AnswerverifiedB

If Trent's MPC is 0.80, this means that he will

Correct AnswerverifiedShow Answer

Refer to the given graph. A shift of the consumption schedule from C1 to C2 might be caused by a(n)

Correct AnswerverifiedShow Answer

Dissaving means

Correct AnswerverifiedB

Refer to the diagram. Which of the following would shift the investment demand curve from ID1 to ID3?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The investment demand curve will shift to the right as the result of

Correct AnswerverifiedShow Answer

1 − MPC = MPS.

Correct AnswerverifiedShow Answer

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B

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B

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B

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