Question 1

Which of the following is likely to be an effect of excess capacity on the investment demand curve of an economy?

Accepted Answer

A) A leftward shift of the curve 
B) A rightward shift of the curve 
C) An upward movement along the curve 
D) A downward movement along the curve 
A) A leftward shift of the curve 
B) A rightward shift of the curve 
C) An upward movement along the curve 
D) A downward movement along the curve

Question 2

If Ben's MPC is .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 eight-tenths of any level of disposable income. 
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 eight-tenths of any level of disposable income.

Question 3

The saving schedule is such that as aggregate income increases by a certain amount, saving:

Accepted Answer

A) increases by the same amount as the increase in income. 
B) does not change. 
C) increases. 
D) decreases. 
A) increases by the same amount as the increase in income. 
B) does not change. 
C) increases. 
D) decreases.

Question 4

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

Accepted Answer

A) zero. 
B) 150 
C) 60 
D) 120 
A) zero. 
B) 150 
C) 60 
D) 120

Question 5

The APC can be defined as:

Accepted Answer

A) change in consumption/change in income 
B) consumption/income 
C) change in income/change in consumption 
D) income/consumption 
A) change in consumption/change in income 
B) consumption/income 
C) change in income/change in consumption 
D) income/consumption

Question 6

The relationship between consumption and disposable income is such that:

Accepted Answer

A) an inverse and stable relationship exists between consumption and income. 
B) a direct, but very volatile, relationship exists between consumption and income. 
C) a direct and quite stable relationship exists between consumption and income. 
D) the two are always equal. 
A) an inverse and stable relationship exists between consumption and income. 
B) a direct, but very volatile, relationship exists between consumption and income. 
C) a direct and quite stable relationship exists between consumption and income. 
D) the two are always equal.

Question 7

If a $500 billion increase in investment spending increases income by $500 billion in the first round of the multiplier process and by $450 in the second round, income will eventually increase by:

Accepted Answer

A) $2500 billion. 
B) $3000 billion. 
C) $4000 billion. 
D) $5000 billion. 
A) $2500 billion. 
B) $3000 billion. 
C) $4000 billion. 
D) $5000 billion.

Question 8

Refer to the data below.The MPS is:

Accepted Answer

A) 7/10. 
B) 3/10. 
C) 2/5. 
D) 3/5. 
A) 7/10. 
B) 3/10. 
C) 2/5. 
D) 3/5.

Question 9

As disposable income goes up the:

Accepted Answer

A) APC falls. 
B) APS falls. 
C) volume of consumption declines absolutely. 
D) volume of investment can be expected to diminish. 
A) APC falls. 
B) APS falls. 
C) volume of consumption declines absolutely. 
D) volume of investment can be expected to diminish.

Question 10

If the Brown family's marginal propensity to consume is 0.70, then it will consume seven-tenths of its total income.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) .5. 
B) .8. 
C) .75. 
D) .9. 
A) .5. 
B) .8. 
C) .75. 
D) .9.

Question 12

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

Accepted Answer

A) .5. 
B) .25. 
C) .2. 
D) .1. 
A) .5. 
B) .25. 
C) .2. 
D) .1.

Question 13

Which of the following will not tend to shift the consumption schedule upward?

Accepted Answer

A) a currently small stock of durable goods in the possession of consumers 
B) the expectation of a future decline in the consumer price index 
C) a currently low level of household debt. 
D) the expectation of future shortages of essential consumer goods. 
A) a currently small stock of durable goods in the possession of consumers 
B) the expectation of a future decline in the consumer price index 
C) a currently low level of household debt. 
D) the expectation of future shortages of essential consumer goods.

Question 14

Assume the MPC is 2/3.If investment spending increases by $2 billion, the level of GDP will increase by:

Accepted Answer

A) $3 billion. 
B) $2/3 billion. 
C) $2 billion. 
D) $6 billion. 
A) $3 billion. 
B) $2/3 billion. 
C) $2 billion. 
D) $6 billion.

Question 15

A business firm will purchase additional capital goods if the real rate of interest it must pay is less than the expected rate of return from the investment.

Accepted Answer

A) True 
 B)False

Question 16

If the marginal propensity to save is 0.2 in a private closed economy, a $20 billion rise in investment spending will increase:

Accepted Answer

A) GDP by $120 billion. 
B) GDP by $20 billion. 
C) saving by $25 billion. 
D) consumption by $80 billion. 
A) GDP by $120 billion. 
B) GDP by $20 billion. 
C) saving by $25 billion. 
D) consumption by $80 billion.

Question 17

The slope of the consumption schedule is equal to the marginal propensity to consume.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that a new machine tool having a useful life of only one year costs $80,000.Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000.The expected rate of return on this tool is:

Accepted Answer

A) 80 percent. 
B) 8 percent. 
C) 2 percent. 
D) 20 percent. 
A) 80 percent. 
B) 8 percent. 
C) 2 percent. 
D) 20 percent.

Question 19

Dissaving occurs where:

Accepted Answer

A) income exceeds consumption. 
B) saving exceeds consumption. 
C) consumption exceeds income. 
D) saving exceeds income. 
A) income exceeds consumption. 
B) saving exceeds consumption. 
C) consumption exceeds income. 
D) saving exceeds income.

Question 20

The multiplier effect indicates that:

Accepted Answer

A) a decline in the interest rate will cause a proportionately larger increase in investment. 
B) a change in aggregate expenditures will change aggregate income by a larger amount. 
C) a change in aggregate expenditures will increase aggregate income by the same amount. 
D) a small increase in total income will generate a large change in aggregate expenditures. 
A) a decline in the interest rate will cause a proportionately larger increase in investment. 
B) a change in aggregate expenditures will change aggregate income by a larger amount. 
C) a change in aggregate expenditures will increase aggregate income by the same amount. 
D) a small increase in total income will generate a large change in aggregate expenditures.

Exam 10: B: Basic Macroeconomic Relationships

Which of the following is likely to be an effect of excess capacity on the investment demand curve of an economy?

If Ben's MPC is .80, this means that he will:

The saving schedule is such that as aggregate income increases by a certain amount, saving:

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

The APC can be defined as:

The relationship between consumption and disposable income is such that:

If a $500 billion increase in investment spending increases income by $500 billion in the first round of the multiplier process and by $450 in the second round, income will eventually increase by:

Refer to the data below.The MPS is:

As disposable income goes up the:

If the Brown family's marginal propensity to consume is 0.70, then it will consume seven-tenths of its total income.

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

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

Which of the following will not tend to shift the consumption schedule upward?

Assume the MPC is 2/3.If investment spending increases by $2 billion, the level of GDP will increase by:

A business firm will purchase additional capital goods if the real rate of interest it must pay is less than the expected rate of return from the investment.

If the marginal propensity to save is 0.2 in a private closed economy, a $20 billion rise in investment spending will increase:

The slope of the consumption schedule is equal to the marginal propensity to consume.

Suppose that a new machine tool having a useful life of only one year costs $80,000.Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000.The expected rate of return on this tool is:

Dissaving occurs where:

The multiplier effect indicates that:

B: Limits, Alternatives, and Choices

A: - Limits, Alternatives, and Choices

B: The Market System and the Circular Flow

A: - The Market System and the Circular Flow

B: Demand, Supply, and Market Equilibrium

A: - Demand, Supply, and Market Equilibrium

B: Market Failures: Public Goods and Externalities

A: - Market Failures: Public Goods and Externalities

B: Governments Role and Government Failure

A: Governments Role and Government Failure

B: an Introduction to Macroeconomics

A: an Introduction to Macroeconomics

B: Measuring the Economys Output

A: Measuring the Economys Output

B: Economic Growth

A: Economic Growth

B: Business Cycles, Unemployment, and Inflation

A: Business Cycles, Unemployment, and Inflation

A: Basic Macroeconomic Relationships

B: The Aggregate Expenditures Model

A: The Aggregate Expenditures Model

B: Aggregate Demand and Aggregate Supply

A: Aggregate Demand and Aggregate Supply

B: Fiscal Policy, Deficits, Surpluses, and Debt

A: Fiscal Policy, Deficits, Surpluses, and Debt

B: Money, Banking, and Money Creation

A: Money, Banking, and Money Creation

B: Interest Rates and Monetary Policy

A: Interest Rates and Monetary Policy

C: Financial Economics

A: Long-Run Macroeconomic Adjustments

B: Long-Run Macroeconomic Adjustments

A: International Trade

B: International Trade

A: The Balance of Payments and Exchange Rates

B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

Filters