Question 1

The main determinants of investment are the interest rates and expected profit.

Accepted Answer

A) True 
 B)False

Question 2

The table given below shows the values of different components of aggregate expenditure of an economy.The marginal propensity to consume (MPC)equals:
?
Table 9.2
?
?
$\text { (Trillions of Dollars) }$
$\begin{array}{llccccccc}
\text { Rea } & \text { Net } & \text { Disposab } & \text { Consumpti } & \text { Savin } & \text { Planned } & \text { Governme } & \text { Net } & \text { Planned } \
1 & \text { Taxe } & \text { le } & \text { on } & \text { g } & \text { Investme } & \text { nt } & \text { Export } & \text { Aggregate } \
\mathrm{GD} & \text { s } & \text { Income } & \text { (C) } & \text { (S) } & \text { nt } & \text { Purchases } & \text { s } & \text { Expenditures } \
\mathrm{P} & (\mathrm{NT}) & (\mathrm{Y}-\mathrm{NT}) & & & \text { (I) } & \text { (G) } & (\mathrm{X}- & \mathrm{C}+\mathrm{I}+\mathrm{G}+(\mathrm{X}- \
(\mathrm{Y}) & & & & & & & \text { M) } & \mathrm{M})
\
\hline 5.0 & 1.0 & 4.0 & 3.9 & 0.1 & 1.0 & 1.0 & -0.7 & 5.2 \
5.5 & 1.0 & 4.5 & 4.3 & 0.2 & 1.0 & 1.0 & -0.7 & 5.6 \
6.0 & 1.0 & 5.0 & 4.7 & 0.3 & 1.0 & 1.0 & -0.7 & 6.0 \
6.5 & 1.0 & 5.5 & 5.1 & 0.4 & 1.0 & 1.0 & -0.7 & 6.4 \
7.0 & 1.0 & 6.0 & 5.5 & 0.5 & 1.0 & 1.0 & -0.7 & 6.8
\end{array}$

Accepted Answer

A) 0.20 or 1/5. 
B) 0.40 or 2/5. 
C) 0.80 or 4/5. 
D) 0.90 or 9/10. 
E) 0.60 or 3/5. 
A) 0.20 or 1/5. 
B) 0.40 or 2/5. 
C) 0.80 or 4/5. 
D) 0.90 or 9/10. 
E) 0.60 or 3/5.

Question 3

An increase in the price level will:

Accepted Answer

A) make the consumption function flatter. 
B) make the consumption function steeper. 
C) increase consumption because wages will increase. 
D) decrease consumption because falling interest rates make it cheaper to borrow. 
E) decrease consumption because the value of net wealth will decrease. 
A) make the consumption function flatter. 
B) make the consumption function steeper. 
C) increase consumption because wages will increase. 
D) decrease consumption because falling interest rates make it cheaper to borrow. 
E) decrease consumption because the value of net wealth will decrease.

Question 4

Movement along the aggregate demand curve may be caused by a change in autonomous investment spending.

Accepted Answer

A) True 
 B)False

Question 5

If the simple spending multiplier is 10,the marginal propensity to save (MPS)is:

Accepted Answer

A) 1/10. 
B) 9/10. 
C) 1/9. 
D) 10/9. 
E) 9. 
A) 1/10. 
B) 9/10. 
C) 1/9. 
D) 10/9. 
E) 9.

Question 6

The table given below shows the real gross domestic product (GDP),consumption,and planned investment in an economy.The marginal propensity to consume (MPC)in the economy is:
?
Table 9.3
?
?
$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Real } \
\text { GDP } ( \$ )
\end{array} & \text { Consumption } ( \$ ) & \begin{array} { c } 
\text { Planned } \
\text { Investment } ( \$ )
\end{array} \
\hline 0 & 140 & 100 \
100 & 220 & 100 \
200 & 300 & 100 \
300 & 380 & 100 \
400 & 460 & 100 \
500 & 540 & 100 \
600 & 620 & 100 \
700 & 700 & 100 \
800 & 780 & 100 \
900 & 860 & 100 \
1,000 & 940 & 100 \
1,100 & 1,020 & 100 \
1,200 & 1,100 & 100 \
1,300 & 1,180 & 100
\end{array}$$

Accepted Answer

A) 0. 
B) 0.2. 
C) 0.8. 
D) 0.9. 
E) 80. 
A) 0. 
B) 0.2. 
C) 0.8. 
D) 0.9. 
E) 80.

Question 7

Exports minus imports equal net exports.

Accepted Answer

A) True 
 B)False

Question 8

Identify the correct statement.

Accepted Answer

A) During a recession,investment decreases while consumption increases. 
B) During a recession,investment increases while consumption decreases. 
C) During a recession,investment is constant while consumption increases. 
D) Annual variations in investment are larger than annual variations in consumption. 
E) Annual variations in investment are smaller than annual variations in consumption. 
A) During a recession,investment decreases while consumption increases. 
B) During a recession,investment increases while consumption decreases. 
C) During a recession,investment is constant while consumption increases. 
D) Annual variations in investment are larger than annual variations in consumption. 
E) Annual variations in investment are smaller than annual variations in consumption.

Question 9

An increase in planned investment will shift the _____.

Accepted Answer

A) aggregate demand curve rightward 
B) aggregate demand curve leftward 
C) aggregate supply curve rightward 
D) aggregate supply curve leftward 
E) consumption function upward 
A) aggregate demand curve rightward 
B) aggregate demand curve leftward 
C) aggregate supply curve rightward 
D) aggregate supply curve leftward 
E) consumption function upward

Question 10

If a household's income rises from $46,000 to $46,700 and its consumption spending rises from $35,800 to $36,400,then its:

Accepted Answer

A) marginal propensity to consume is 0.86. 
B) marginal propensity to consume is 0.99. 
C) marginal propensity to consume is 0.98. 
D) marginal propensity to save is 0.01. 
E) marginal propensity to save is 0.86. 
A) marginal propensity to consume is 0.86. 
B) marginal propensity to consume is 0.99. 
C) marginal propensity to consume is 0.98. 
D) marginal propensity to save is 0.01. 
E) marginal propensity to save is 0.86.

Question 11

The sum of the marginal propensity to consume (MPC)and the marginal propensity to save (MPS)equals:

Accepted Answer

A) 0.5. 
B) the multiplier. 
C) the slope of the consumption function. 
D) 1.0. 
E) the slope of the saving function. 
A) 0.5. 
B) the multiplier. 
C) the slope of the consumption function. 
D) 1.0. 
E) the slope of the saving function.

Question 12

Which of the following is true of net taxes?

Accepted Answer

A) The level of net taxes varies directly with the level of transfer payments. 
B) The level of net taxes varies inversely with the level of transfer payments. 
C) Net taxes must always be less than zero. 
D) Net taxes increase when income tax rates are reduced. 
E) Net taxes increase when income decreases. 
A) The level of net taxes varies directly with the level of transfer payments. 
B) The level of net taxes varies inversely with the level of transfer payments. 
C) Net taxes must always be less than zero. 
D) Net taxes increase when income tax rates are reduced. 
E) Net taxes increase when income decreases.

Question 13

The table given below shows the values of different components of aggregate expenditure of an economy.At the equilibrium level of gross domestic product (GDP),saving equals _____.
?
Table 9.2
?
?
$\text { (Trillions of Dollars) }$
$\begin{array}{llccccccc}
\text { Rea } & \text { Net } & \text { Disposab } & \text { Consumpti } & \text { Savin } & \text { Planned } & \text { Governme } & \text { Net } & \text { Planned } \
1 & \text { Taxe } & \text { le } & \text { on } & \text { g } & \text { Investme } & \text { nt } & \text { Export } & \text { Aggregate } \
\mathrm{GD} & \text { s } & \text { Income } & \text { (C) } & \text { (S) } & \text { nt } & \text { Purchases } & \text { s } & \text { Expenditures } \
\mathrm{P} & (\mathrm{NT}) & (\mathrm{Y}-\mathrm{NT}) & & & \text { (I) } & \text { (G) } & (\mathrm{X}- & \mathrm{C}+\mathrm{I}+\mathrm{G}+(\mathrm{X}- \
(\mathrm{Y}) & & & & & & & \text { M) } & \mathrm{M})
\
\hline 5.0 & 1.0 & 4.0 & 3.9 & 0.1 & 1.0 & 1.0 & -0.7 & 5.2 \
5.5 & 1.0 & 4.5 & 4.3 & 0.2 & 1.0 & 1.0 & -0.7 & 5.6 \
6.0 & 1.0 & 5.0 & 4.7 & 0.3 & 1.0 & 1.0 & -0.7 & 6.0 \
6.5 & 1.0 & 5.5 & 5.1 & 0.4 & 1.0 & 1.0 & -0.7 & 6.4 \
7.0 & 1.0 & 6.0 & 5.5 & 0.5 & 1.0 & 1.0 & -0.7 & 6.8
\end{array}$

Accepted Answer

A) $0.4 trillion 
B) $0.1 trillion 
C) $0.5 trillion 
D) $0.2 trillion 
E) $0.3 trillion 
A) $0.4 trillion 
B) $0.1 trillion 
C) $0.5 trillion 
D) $0.2 trillion 
E) $0.3 trillion

Question 14

In the income-expenditure model,if autonomous investment decreases by $10 billion,_____.

Accepted Answer

A) the aggregate expenditure line shifts upward by $10 billion 
B) planned saving increases by $10 billion 
C) the aggregate expenditure line shifts downward by $10 billion 
D) planned saving decreases by $10 billion 
E) the equilibrium level of real GDP demanded increases by $10 billion 
A) the aggregate expenditure line shifts upward by $10 billion 
B) planned saving increases by $10 billion 
C) the aggregate expenditure line shifts downward by $10 billion 
D) planned saving decreases by $10 billion 
E) the equilibrium level of real GDP demanded increases by $10 billion

Question 15

If the spending multiplier is greater than 1.0,a $200 billion increase in autonomous investment will cause:

Accepted Answer

A) equilibrium investment to increase by less than $200 billion. 
B) equilibrium investment to decrease by more than $200 billion. 
C) equilibrium real GDP demanded to increase by more than $200 billion. 
D) equilibrium real GDP demanded to decrease by less than $200 billion. 
E) equilibrium saving to decrease by more than $200 billion. 
A) equilibrium investment to increase by less than $200 billion. 
B) equilibrium investment to decrease by more than $200 billion. 
C) equilibrium real GDP demanded to increase by more than $200 billion. 
D) equilibrium real GDP demanded to decrease by less than $200 billion. 
E) equilibrium saving to decrease by more than $200 billion.

Question 16

Which of the following will shift the consumption function upward?

Accepted Answer

A) A decrease in disposable income 
B) An increase in disposable income 
C) An increase in the interest rate 
D) Expectations of lower future prices 
E) An increase in net wealth 
A) A decrease in disposable income 
B) An increase in disposable income 
C) An increase in the interest rate 
D) Expectations of lower future prices 
E) An increase in net wealth

Question 17

The fraction of an increase in income that is saved is referred to as the _____.

Accepted Answer

A) marginal propensity to save 
B) average propensity to save 
C) marginal propensity to consume 
D) average propensity to consume 
E) saving-consumption ratio 
A) marginal propensity to save 
B) average propensity to save 
C) marginal propensity to consume 
D) average propensity to consume 
E) saving-consumption ratio

Question 18

Suppose an increase in disposable income from $3 trillion to $3.2 trillion increases consumption from $2.5 trillion to $2.6 trillion.The marginal propensity to consume is _____.

Accepted Answer

A) 0.1 
B) 0.2 
C) 0.5 
D) 0.8 
E) 0.9 
A) 0.1 
B) 0.2 
C) 0.5 
D) 0.8 
E) 0.9

Question 19

If the marginal propensity to save (MPS)is 1/8,the value of the simple spending multiplier is:

Accepted Answer

A) 8. 
B) 1/8. 
C) 2. 
D) 1/2. 
E) 4. 
A) 8. 
B) 1/8. 
C) 2. 
D) 1/2. 
E) 4.

Question 20

Movement along the aggregate expenditure line is caused by a change in the level of income.

Accepted Answer

A) True 
 B)False

The main determinants of investment are the interest rates and expected profit.

An increase in the price level will:

Movement along the aggregate demand curve may be caused by a change in autonomous investment spending.

If the simple spending multiplier is 10,the marginal propensity to save (MPS)is:

Exports minus imports equal net exports.

Identify the correct statement.

An increase in planned investment will shift the _____.

If a household's income rises from $46,000 to $46,700 and its consumption spending rises from $35,800 to $36,400,then its:

The sum of the marginal propensity to consume (MPC)and the marginal propensity to save (MPS)equals:

Which of the following is true of net taxes?

In the income-expenditure model,if autonomous investment decreases by $10 billion,_____.

If the spending multiplier is greater than 1.0,a $200 billion increase in autonomous investment will cause:

Which of the following will shift the consumption function upward?

The fraction of an increase in income that is saved is referred to as the _____.

Suppose an increase in disposable income from $3 trillion to $3.2 trillion increases consumption from $2.5 trillion to $2.6 trillion.The marginal propensity to consume is _____.

If the marginal propensity to save (MPS)is 1/8,the value of the simple spending multiplier is:

Movement along the aggregate expenditure line is caused by a change in the level of income.

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Exam 9: Aggregate Demand

The main determinants of investment are the interest rates and expected profit.

An increase in the price level will:

Movement along the aggregate demand curve may be caused by a change in autonomous investment spending.

If the simple spending multiplier is 10,the marginal propensity to save (MPS)is:

Exports minus imports equal net exports.

Identify the correct statement.

An increase in planned investment will shift the _____.

If a household's income rises from $46,000 to $46,700 and its consumption spending rises from $35,800 to $36,400,then its:

The sum of the marginal propensity to consume (MPC)and the marginal propensity to save (MPS)equals:

Which of the following is true of net taxes?

In the income-expenditure model,if autonomous investment decreases by $10 billion,_____.

If the spending multiplier is greater than 1.0,a $200 billion increase in autonomous investment will cause:

Which of the following will shift the consumption function upward?

The fraction of an increase in income that is saved is referred to as the _____.

Suppose an increase in disposable income from $3 trillion to $3.2 trillion increases consumption from $2.5 trillion to $2.6 trillion.The marginal propensity to consume is _____.

If the marginal propensity to save (MPS)is 1/8,the value of the simple spending multiplier is:

Movement along the aggregate expenditure line is caused by a change in the level of income.

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters