Question 1

If the saving function is S = -25 + 0.4YD,then autonomous consumption is

Accepted Answer

A) 25. 
B) -25. 
C) 15. 
D) 10. 
E) 0.6. 
A) 25. 
B) -25. 
C) 15. 
D) 10. 
E) 0.6. A

Question 2

Use the figure below to answer the following questions.
   
Figure 27.1.1
This figure describes the relationship between consumption expenditure and disposable income for a model economy.
-Refer to Figure 27.1.1.Consumption and disposable income are equal

Accepted Answer

A) at all points along the consumption function. 
B) when saving equals $40 billion and disposable income equals $540 billion. 
C) when disposable income is $500 billion. 
D) when disposable income is $600 billion. 
E) when disposable income is greater than or equal to $500 billion. 
A) at all points along the consumption function. 
B) when saving equals $40 billion and disposable income equals $540 billion. 
C) when disposable income is $500 billion. 
D) when disposable income is $600 billion. 
E) when disposable income is greater than or equal to $500 billion. C

Question 3

Use the figure below to answer the following questions.
   
Figure 27.1.1
This figure describes the relationship between consumption expenditure and disposable income for a model economy.
-Refer to Figure 27.1.1.When disposable income is equal to $200 billion,saving is

Accepted Answer

A) zero. 
B) $200 billion. 
C) $150 billion. 
D) $60 billion. 
E) - $60 billion. 
A) zero. 
B) $200 billion. 
C) $150 billion. 
D) $60 billion. 
E) - $60 billion. E

Question 4

The marginal propensity to save is calculated as

Accepted Answer

A) saving divided by disposable income. 
B) saving divided by the change in disposable income. 
C) the change in saving divided by the change in consumption expenditure. 
D) the change in saving divided by the change in disposable income. 
E) the change in saving divided by disposable income. 
A) saving divided by disposable income. 
B) saving divided by the change in disposable income. 
C) the change in saving divided by the change in consumption expenditure. 
D) the change in saving divided by the change in disposable income. 
E) the change in saving divided by disposable income.

Question 5

The marginal propensity to consume

Accepted Answer

A) is equal to zero when disposable income equals consumption expenditure. 
B) is equal to 1 minus the slope of the saving function. 
C) is negative when saving is positive. 
D) increases as the economy moves upward along the consumption function. 
E) is greater than the slope of the 45-degree line. 
A) is equal to zero when disposable income equals consumption expenditure. 
B) is equal to 1 minus the slope of the saving function. 
C) is negative when saving is positive. 
D) increases as the economy moves upward along the consumption function. 
E) is greater than the slope of the 45-degree line.

Question 6

An increase in autonomous consumption

Accepted Answer

A) shifts the consumption function upward. 
B) shifts the consumption function downward. 
C) creates a movement downward along the consumption function. 
D) creates a movement upward along the consumption function. 
E) changes the slope of the consumption function. 
A) shifts the consumption function upward. 
B) shifts the consumption function downward. 
C) creates a movement downward along the consumption function. 
D) creates a movement upward along the consumption function. 
E) changes the slope of the consumption function.

Question 7

The consumption functions for the Canadian economy covering the period from 1970 to 2010 indicate a marginal propensity to consume approximately equal to

Accepted Answer

A) 0.9. 
B) 0.65. 
C) 0.85. 
D) 0.7. 
E) 0.54. 
A) 0.9. 
B) 0.65. 
C) 0.85. 
D) 0.7. 
E) 0.54.

Question 8

Use the information below to answer the following question.
Fact 27.5.1
The economy of Beverly Hills has a consumption function of C = 10 + 0.8Y, investment equal to 6, government expenditure equal to 10, exports equal to 10, and an import function of M = 0.1Y.
-Refer to Fact 27.5.1.What is the equation for the aggregate expenditure curve for this economy?

Accepted Answer

A) AE = 16 + 0.7Y 
B) AE = 36 - 0.7Y 
C) AE = 26 + 0.8Y 
D) AE = 36 + 0.9Y 
E) AE = 36 + 0.7Y 
A) AE = 16 + 0.7Y 
B) AE = 36 - 0.7Y 
C) AE = 26 + 0.8Y 
D) AE = 36 + 0.9Y 
E) AE = 36 + 0.7Y

Question 9

Complete the following sentence.A household

Accepted Answer

A) consumes or pays taxes out of disposable income. 
B) consumes, saves, or pays taxes out of disposable income. 
C) consumes or saves out of disposable income. 
D) only consumes out of disposable income. 
E) None of the above. 
A) consumes or pays taxes out of disposable income. 
B) consumes, saves, or pays taxes out of disposable income. 
C) consumes or saves out of disposable income. 
D) only consumes out of disposable income. 
E) None of the above.

Question 10

Everything else remaining the same,autonomous consumption

Accepted Answer

A) increases as disposable income decreases. 
B) increases as disposable income increases. 
C) does not change as disposable income changes. 
D) is usually assumed to be zero. 
E) decreases as disposable income decreases. 
A) increases as disposable income decreases. 
B) increases as disposable income increases. 
C) does not change as disposable income changes. 
D) is usually assumed to be zero. 
E) decreases as disposable income decreases.

Question 11

Use the figure below to answer the following questions.
   
Figure 27.1.2
-Refer to Figure 27.1.2.The marginal propensity to consume is

Accepted Answer

A) 800. 
B) 0.8. 
C) 0.2. 
D) 0.25. 
E) 0.75. 
A) 800. 
B) 0.8. 
C) 0.2. 
D) 0.25. 
E) 0.75.

Question 12

The fact that imports increase as real GDP increases implies that imports are part of

Accepted Answer

A) marginal expenditure. 
B) autonomous expenditure. 
C) consumption expenditure. 
D) equilibrium expenditure. 
E) induced expenditure. 
A) marginal expenditure. 
B) autonomous expenditure. 
C) consumption expenditure. 
D) equilibrium expenditure. 
E) induced expenditure.

Question 13

The marginal propensity to consume is calculated as

Accepted Answer

A) consumption expenditure divided by the change in disposable income. 
B) the change in consumption expenditure divided by disposable income. 
C) consumption expenditure divided by total disposable income. 
D) the change in consumption expenditure divided by saving. 
E) the change in consumption expenditure divided by the change in disposable income. 
A) consumption expenditure divided by the change in disposable income. 
B) the change in consumption expenditure divided by disposable income. 
C) consumption expenditure divided by total disposable income. 
D) the change in consumption expenditure divided by saving. 
E) the change in consumption expenditure divided by the change in disposable income.

Question 14

If consumption expenditure for a household increases from $300 to $500 when disposable income increases from $200 to $500,the marginal propensity to consume is

Accepted Answer

A) equal to 1. 
B) equal to 0.75. 
C) equal to 1.33. 
D) negative. 
E) equal to 0.67. 
A) equal to 1. 
B) equal to 0.75. 
C) equal to 1.33. 
D) negative. 
E) equal to 0.67.

Question 15

Disposable income is

Accepted Answer

A) used for consumption only. 
B) aggregate income minus taxes plus transfer payments. 
C) aggregate income plus transfer payments. 
D) aggregate income minus taxes. 
E) aggregate income minus transfer payments. 
A) used for consumption only. 
B) aggregate income minus taxes plus transfer payments. 
C) aggregate income plus transfer payments. 
D) aggregate income minus taxes. 
E) aggregate income minus transfer payments.

Question 16

As the aggregate expenditure curve becomes steeper,the value of the multiplier becomes

Accepted Answer

A) equal to the marginal propensity to save. 
B) larger. 
C) smaller. 
D) negative. 
E) greater than 1. 
A) equal to the marginal propensity to save. 
B) larger. 
C) smaller. 
D) negative. 
E) greater than 1.

Question 17

Use the figure below to answer the following questions.
   
Figure 27.2.3
There are no taxes in this economy.
-In Figure 27.2.3,equilibrium expenditure is

Accepted Answer

A) $10 billion. 
B) $100 billion. 
C) $150 billion. 
D) $347 billion. 
E) $375 billion. 
A) $10 billion. 
B) $100 billion. 
C) $150 billion. 
D) $347 billion. 
E) $375 billion.

Question 18

If the marginal propensity to consume is 0.85,what change in consumption expenditure would you expect if disposable income increases by $200 million?

Accepted Answer

A) $20 million 
B) $170 million 
C) $180 million 
D) $1,800 million 
E) $18 million 
A) $20 million 
B) $170 million 
C) $180 million 
D) $1,800 million 
E) $18 million

Question 19

Use the figure below to answer the following questions.
   
Figure 27.2.3
There are no taxes in this economy.
-In Figure 27.2.3,autonomous expenditure is

Accepted Answer

A) $10 billion. 
B) $100 billion. 
C) $150 billion. 
D) $347 billion. 
E) $375 billion. 
A) $10 billion. 
B) $100 billion. 
C) $150 billion. 
D) $347 billion. 
E) $375 billion.

Question 20

The marginal propensity to save

Accepted Answer

A) equals 1 - MPC. 
B) is between zero and 1/2. 
C) is greater than 1. 
D) is greater than 1 but less than 2. 
E) is negative. 
A) equals 1 - MPC. 
B) is between zero and 1/2. 
C) is greater than 1. 
D) is greater than 1 but less than 2. 
E) is negative.

Exam 27: Expenditure Multipliers: The Keynesian Model

If the saving function is S = -25 + 0.4YD,then autonomous consumption is

Use the figure below to answer the following questions. Figure 27.1.1 This figure describes the relationship between consumption expenditure and disposable income for a model economy. -Refer to Figure 27.1.1.Consumption and disposable income are equal

Use the figure below to answer the following questions. Figure 27.1.1 This figure describes the relationship between consumption expenditure and disposable income for a model economy. -Refer to Figure 27.1.1.When disposable income is equal to $200 billion,saving is

The marginal propensity to save is calculated as

The marginal propensity to consume

An increase in autonomous consumption

The consumption functions for the Canadian economy covering the period from 1970 to 2010 indicate a marginal propensity to consume approximately equal to

Complete the following sentence.A household

Everything else remaining the same,autonomous consumption

Use the figure below to answer the following questions. Figure 27.1.2 -Refer to Figure 27.1.2.The marginal propensity to consume is

The fact that imports increase as real GDP increases implies that imports are part of

The marginal propensity to consume is calculated as

If consumption expenditure for a household increases from $300 to $500 when disposable income increases from $200 to $500,the marginal propensity to consume is

Disposable income is

As the aggregate expenditure curve becomes steeper,the value of the multiplier becomes

Use the figure below to answer the following questions. Figure 27.2.3 There are no taxes in this economy. -In Figure 27.2.3,equilibrium expenditure is

If the marginal propensity to consume is 0.85,what change in consumption expenditure would you expect if disposable income increases by $200 million?

Use the figure below to answer the following questions. Figure 27.2.3 There are no taxes in this economy. -In Figure 27.2.3,autonomous expenditure is

The marginal propensity to save

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