Question 1

The fluctuations in the income level that result from changes in investment spending

Accepted Answer

A)   	tend to be larger with a larger mpc 
B) 	tend to be larger if the income tax rate (t) is larger 
C) 	tend to be larger with a larger mps 
D)   	tend to be smaller if the apc is smaller 
E)   	depend only on the magnitude of the changes in investment spending but not on the size of the mpc 
A)   	tend to be larger with a larger mpc 
B) 	tend to be larger if the income tax rate (t) is larger 
C) 	tend to be larger with a larger mps 
D)   	tend to be smaller if the apc is smaller 
E)   	depend only on the magnitude of the changes in investment spending but not on the size of the mpc A

Question 2

Assume a model with no foreign sector, no income taxation, and a consumption function defined as C = 400 + (0.75)YD.If government transfer payments decrease by 200, then

Accepted Answer

A) income will decrease by 600 
B) income will decrease by 800 
C) income will increase by 800 
D) income will increase by 200 
E) income will increase by 150 
A) income will decrease by 600 
B) income will decrease by 800 
C) income will increase by 800 
D) income will increase by 200 
E) income will increase by 150 A

Question 3

If the consumption function is defined as C = 800 + (0.75)YD, the marginal income tax rate is t = 0.5, and autonomous investment decreases by 50, then the budget surplus will

Accepted Answer

A) remain unaffected 
B) decrease by 100 
C) decrease by 80 
D) decrease by 40 
E) decrease by 10 
A) remain unaffected 
B) decrease by 100 
C) decrease by 80 
D) decrease by 40 
E) decrease by 10 D

Question 4

In 2009, the U.S.federal budget deficit was

Accepted Answer

A) about $540 billion or roughly 3 percent of GDP 
B) about $820 billion or roughly 4 percent of GDP 
C) about $1.1 trillion or roughly 8 percent of GDP 
D) about $1.4 trillion or roughly 10 percent of GDP 
E) about $12.5 trillion and only slightly lower than GDP 
A) about $540 billion or roughly 3 percent of GDP 
B) about $820 billion or roughly 4 percent of GDP 
C) about $1.1 trillion or roughly 8 percent of GDP 
D) about $1.4 trillion or roughly 10 percent of GDP 
E) about $12.5 trillion and only slightly lower than GDP

Question 5

Assume a simple model without any government.If an increase in autonomous investment of 40 leads to an increase in consumption of 160, then the marginal propensity to save is

Accepted Answer

A) 0)10 
B) 0)20 
C) 0)25 
D) 0)40 
E) 0)80 
A) 0)10 
B) 0)20 
C) 0)25 
D) 0)40 
E) 0)80

Question 6

If total autonomous spending is A? = 800, the marginal propensity to save is mps = 0.2, and the marginal tax rate is t = 0.25, what is the level of equilibrium income?

Accepted Answer

A) 800 
B) 1,000 
C) 2,000 
D) 3,200 
E) 4,000 
A) 800 
B) 1,000 
C) 2,000 
D) 3,200 
E) 4,000

Question 7

A decrease in the full-employment budget surplus will

Accepted Answer

A) increase national income 
B) increase saving 
C) increase consumption 
D) all of the above 
E) none of the above 
A) increase national income 
B) increase saving 
C) increase consumption 
D) all of the above 
E) none of the above

Question 8

If the savings function is S = - 400 + (0.25)YD, the marginal income tax rate is t = 0.2, and the equilibrium level of income increases by 1,000, by how much will consumption change?

Accepted Answer

A) 250 
B) 400 
C) 600 
D) 750 
E) 800 
A) 250 
B) 400 
C) 600 
D) 750 
E) 800

Question 9

Assume the consumption function is of the form C = 200 + (0.75)YD and the income tax rate is t = 0.2.What would be the effect of an increase in government transfers of 200 ?

Accepted Answer

A) an increase in income of 800 
B) an increase in income of 500 
C) an increase in income of 375 
D) an increase in income of 300 
E) an increase in income of 125 
A) an increase in income of 800 
B) an increase in income of 500 
C) an increase in income of 375 
D) an increase in income of 300 
E) an increase in income of 125

Question 10

In a simple model with no government or foreign sector, the change in unplanned inventory at equilibrium is

Accepted Answer

A) dependent upon the amount of consumption 
B) equal to output minus consumption 
C) zero 
D) always positive 
E) usually negative 
A) dependent upon the amount of consumption 
B) equal to output minus consumption 
C) zero 
D) always positive 
E) usually negative

Question 11

If the savings function is of the form S = - 200 + (0.1)YD and the marginal income tax rate is t = 0.2, an increase in income of 200 will increase consumption by

Accepted Answer

A) 180 
B) 144 
C) 80 
D) 72 
E) 20 
A) 180 
B) 144 
C) 80 
D) 72 
E) 20

Question 12

Assume that the savings function is of the form S = - 100 + (0.2)YD and the marginal income tax rate is t = 0.25.What would be the effect on the equilibrium level of output if autonomous consumption changes by change Co  = - 50?

Accepted Answer

A) a decrease in output of 400 
B) a decrease in output of 250 
C) a decrease in output of 200 
D) a decrease in output of 125 
E) a decrease in output of 100 
A) a decrease in output of 400 
B) a decrease in output of 250 
C) a decrease in output of 200 
D) a decrease in output of 125 
E) a decrease in output of 100

Question 13

The size of the expenditure multiplier depends on

Accepted Answer

A) the marginal propensity to consume 
B) the marginal propensity to import 
C) the marginal income tax rate 
D) all of the above 
E) only A and B 
A) the marginal propensity to consume 
B) the marginal propensity to import 
C) the marginal income tax rate 
D) all of the above 
E) only A and B

Question 14

The expenditure multiplier is used to calculate the change in

Accepted Answer

A) spending caused by a change in income 
B) equilibrium income caused by a change in autonomous spending 
C) intended spending caused by a change in consumption 
D) disposable income caused by a change in saving 
E) government expenditures caused by a change in income 
A) spending caused by a change in income 
B) equilibrium income caused by a change in autonomous spending 
C) intended spending caused by a change in consumption 
D) disposable income caused by a change in saving 
E) government expenditures caused by a change in income

Question 15

Assume an economy with no foreign sector, a marginal propensity to save of mps = 0.1, and a marginal income tax rate of t = 1/3.What change in government purchases would lead to an increase in national income of 500?

Accepted Answer

A) 50 
B) 100 
C) 200 
D) 300 
E) 500 
A) 50 
B) 100 
C) 200 
D) 300 
E) 500

Question 16

The marginal propensity to consume (mpc)

Accepted Answer

A) shows the fraction of total national income that is used for consumption 
B) added to the marginal propensity to save (mps) always equals zero 
C) is the relationship between a change in consumer purchases and the change in disposable income that allows consumption to change 
D) declines as disposable income declines, eventually becoming zero as disposable income reaches zero 
E) decreases as autonomous saving increases 
A) shows the fraction of total national income that is used for consumption 
B) added to the marginal propensity to save (mps) always equals zero 
C) is the relationship between a change in consumer purchases and the change in disposable income that allows consumption to change 
D) declines as disposable income declines, eventually becoming zero as disposable income reaches zero 
E) decreases as autonomous saving increases

Question 17

Assume an economy with no foreign sector, a marginal propensity to save of mps = 0.1, and a marginal income tax rate of t = 1/3.If government transfer payments decrease by 200, which of the following is true?

Accepted Answer

A) national income will decrease by 450 
B) income tax revenues will decrease by 150 
C) the budget surplus will increase by 50 
D) all of the above 
E) only A and B 
A) national income will decrease by 450 
B) income tax revenues will decrease by 150 
C) the budget surplus will increase by 50 
D) all of the above 
E) only A and B

Question 18

In a model with no government or foreign sector, if autonomous consumption is Co = 80, investment is Io = 70, and the marginal propensity to save is s = 0.25, equilibrium income is

Accepted Answer

A) 150 
B) 200 
C) 225 
D) 600 
E) 750 
A) 150 
B) 200 
C) 225 
D) 600 
E) 750

Question 19

If the full-employment budget surplus is positive but the actual budget surplus is negative, what can we conclude?

Accepted Answer

A) nothing 
B) that saving exceeds investment 
C) that the economy is in a boom 
D) that fiscal policy is too restrictive 
E) that fiscal policy is too expansionary 
A) nothing 
B) that saving exceeds investment 
C) that the economy is in a boom 
D) that fiscal policy is too restrictive 
E) that fiscal policy is too expansionary

Question 20

Assume a simple model with no government or foreign sector.If an increase in autonomous investment of 100 leads to an increase in consumption of 300, the size of the expenditure multiplier is

Accepted Answer

A) 0)75 
B) 1)33 
C) 3)00 
D) 4)00 
E) 5)00 
A) 0)75 
B) 1)33 
C) 3)00 
D) 4)00 
E) 5)00

Exam 10: Income and spending

The fluctuations in the income level that result from changes in investment spending

Assume a model with no foreign sector, no income taxation, and a consumption function defined as C = 400 + (0.75)YD.If government transfer payments decrease by 200, then

If the consumption function is defined as C = 800 + (0.75)YD, the marginal income tax rate is t = 0.5, and autonomous investment decreases by 50, then the budget surplus will

In 2009, the U.S.federal budget deficit was

Assume a simple model without any government.If an increase in autonomous investment of 40 leads to an increase in consumption of 160, then the marginal propensity to save is

If total autonomous spending is A? = 800, the marginal propensity to save is mps = 0.2, and the marginal tax rate is t = 0.25, what is the level of equilibrium income?

A decrease in the full-employment budget surplus will

If the savings function is S = - 400 + (0.25)YD, the marginal income tax rate is t = 0.2, and the equilibrium level of income increases by 1,000, by how much will consumption change?

Assume the consumption function is of the form C = 200 + (0.75)YD and the income tax rate is t = 0.2.What would be the effect of an increase in government transfers of 200 ?

In a simple model with no government or foreign sector, the change in unplanned inventory at equilibrium is

If the savings function is of the form S = - 200 + (0.1)YD and the marginal income tax rate is t = 0.2, an increase in income of 200 will increase consumption by

Assume that the savings function is of the form S = - 100 + (0.2)YD and the marginal income tax rate is t = 0.25.What would be the effect on the equilibrium level of output if autonomous consumption changes by change Co = - 50?

The size of the expenditure multiplier depends on

The expenditure multiplier is used to calculate the change in

Assume an economy with no foreign sector, a marginal propensity to save of mps = 0.1, and a marginal income tax rate of t = 1/3.What change in government purchases would lead to an increase in national income of 500?

The marginal propensity to consume (mpc)

Assume an economy with no foreign sector, a marginal propensity to save of mps = 0.1, and a marginal income tax rate of t = 1/3.If government transfer payments decrease by 200, which of the following is true?

In a model with no government or foreign sector, if autonomous consumption is Co = 80, investment is Io = 70, and the marginal propensity to save is s = 0.25, equilibrium income is

If the full-employment budget surplus is positive but the actual budget surplus is negative, what can we conclude?

Assume a simple model with no government or foreign sector.If an increase in autonomous investment of 100 leads to an increase in consumption of 300, the size of the expenditure multiplier is

Introduction

National income accounting

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Aggregate supply and demand

Aggregate supply and the phillips curve

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