Question 1

-Refer to the above data. At the $100 level of income, the average propensity to save is:

Accepted Answer

A)   .10.
B)   .20.
C)   .25.
D)   .90.E) A) and B)
F) A) and C)

Question 2

The simple multiplier is:

Accepted Answer

A)   1/MPC.
B)   1/(1 + MP
C)  .
C)   1/MPS.
D)   1/(1 - MPS) .E) C) and D)
F) B) and D)

Question 3

The initial costs of capital goods, and the estimated costs of operating and maintaining those goods, affect the expected rate of return on investment.

Accepted Answer

A) True 
 B)False

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

Question 5

The consumption schedule is such that:

Accepted Answer

A)   both the APC and the MPC increase as income rises.
B)   the APC is constant and the MPC declines as income rises.
C)   the MPC is constant and the APC declines as income rises.
D)   the MPC and APC must be equal at all levels of income.E) A) and B)
F) None of the above

Question 6

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

Accepted Answer

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

Question 7

-Refer to the above diagram. The break-even level of disposable income:

Accepted Answer

A)   is zero.
B)   is minus $10.
C)   is $100.
D)   cannot be determined from the information given.E) C) and D)
F) B) and D)

Question 8

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 D)
F) All of the above

Question 9

Other things equal, the real interest rate and the level of investment are:

Accepted Answer

A)   related only when saving equals planned investment.
B)   unrelated.
C)   inversely related.
D)   directly related.E) B) and C)
F) C) and D)

Question 10

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) All of the above

Question 11

The MPC for an economy is:

Accepted Answer

A)   the slope of the consumption schedule or line.
B)   the slope of the savings schedule or line.
C)   1 divided by the slope of the consumption schedule or line.
D)   1 divided by the slope of the savings schedule or line.E) A) and B)
F) A) and C)

Question 12

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) A) and D)
F) A) and C)

Question 13

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

Question 14

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. The marginal propensity to consume:

Accepted Answer

A)   is highest in economy (1) .
B)   is highest in economy (3) .
C)   is highest in economy (2) .
D)   cannot be calculated from the data given.E) A) and B)
F) B) and C)

Question 15

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) B) and C)
F) C) and D)

Question 16

Holly's break-even level of income is $10,000 and her MPC is 0.75. If her actual disposable income is $16,000, her level of:

Accepted Answer

A)   consumption spending will be $14,500.
B)   consumption spending will be $4,500.
C)   consumption spending will be $13,000.
D)   saving will be $2,500.E) A) and B)
F) B) and C)

Question 17

If the MPC is .70 and gross investment increases by $3 billion, the equilibrium GDP will:

Accepted Answer

A)   increase by about $10 billion.
B)   increase by $2.10 billion.
C)   decrease by $4.29 billion.
D)   increase by $4.29 billion.E) B) and C)
F) B) and D)

Question 18

The ________ of the late 1990s was an example of the wealth effect, while _______ of 2008 was an example of the reverse wealth effect.

Accepted Answer

A)   declining stock values; skyrocketing market prices.
B)   skyrocketing stock values; plunging market prices.
C)   declining market prices; plunging market prices.
D)   tech bust; real estate boom.E) A) and D)
F) B) and D)

Question 19

-Refer to the above diagram. The equation for the saving schedule is:

Accepted Answer

A)   S = .6Y.
B)   Y = 60 + .6S.
C)   S = 60 + .4Y.
D)   S = -60 + .4Y.E) A) and D)
F) B) and C)

Question 20

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

Accepted Answer

A)   subtracting the MPC from "one" 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) A) and B)
F) C) and D)

Exam 8: Basic Macroeconomic Relationships

The simple multiplier is:

Correct Answer
verified

-Refer to the above data. At the $100 level of income, the average propensity to save is:

Correct Answer
verified

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:

Correct Answer
verified

-Refer to the above diagram. The equation for the saving schedule is:

Correct Answer
verified

The consumption schedule shows:

Correct Answer
verified

The __ of the late 1990s was an example of the wealth effect, while _ of 2008 was an example of the reverse wealth effect.

Correct Answer
verified

-Refer to the above diagram. The break-even level of disposable income:

Correct Answer
verified

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

Correct Answer
verified

The MPC for an economy is:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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. The marginal propensity to consume:

Correct Answer
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The consumption schedule is such that:

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

Correct Answer
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Correct Answer
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If the MPC is .70 and gross investment increases by $3 billion, the equilibrium GDP will:

Correct Answer
verified

The initial costs of capital goods, and the estimated costs of operating and maintaining those goods, affect the expected rate of return on investment.

Correct Answer
verified

Holly's break-even level of income is $10,000 and her MPC is 0.75. If her actual disposable income is $16,000, her level of:

Correct Answer
verified

Other things equal, the real interest rate and the level of investment are:

Correct Answer
verified

The multiplier effect:

Correct Answer
verified

Exam 8: Basic Macroeconomic Relationships

The simple multiplier is:

Correct AnswerverifiedShow Answer

-Refer to the above data. At the $100 level of income, the average propensity to save is:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

-Refer to the above diagram. The equation for the saving schedule is:

Correct AnswerverifiedShow Answer

The consumption schedule shows:

Correct AnswerverifiedShow Answer

The ________ of the late 1990s was an example of the wealth effect, while _______ of 2008 was an example of the reverse wealth effect.

Correct AnswerverifiedShow Answer

-Refer to the above diagram. The break-even level of disposable income:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The MPC for an economy is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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. The marginal propensity to consume:

Correct AnswerverifiedShow Answer

The consumption schedule is such that:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the MPC is .70 and gross investment increases by $3 billion, the equilibrium GDP will:

Correct AnswerverifiedShow Answer

The initial costs of capital goods, and the estimated costs of operating and maintaining those goods, affect the expected rate of return on investment.

Correct AnswerverifiedShow Answer

Holly's break-even level of income is $10,000 and her MPC is 0.75. If her actual disposable income is $16,000, her level of:

Correct AnswerverifiedShow Answer

Other things equal, the real interest rate and the level of investment are:

Correct AnswerverifiedShow Answer

The multiplier effect:

Correct AnswerverifiedShow Answer

Correct Answer
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The __ of the late 1990s was an example of the wealth effect, while _ of 2008 was an example of the reverse wealth effect.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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