Question 1

The marginal propensity to consume (MPC)is the fraction of additional income that is spent.

Accepted Answer

A) True 
 B)False

Question 2

John Maynard Keynes argued that the fundamental problem which led to the world depression was

Accepted Answer

A)  negative net exports on goods and services. 
B)  a decreasing supply of goods and services. 
C)  insufficient demand for goods and services. 
D)  a shortage of goods and services. 
A)  negative net exports on goods and services. 
B)  a decreasing supply of goods and services. 
C)  insufficient demand for goods and services. 
D)  a shortage of goods and services.

Question 3

Increases in investment exceed increases in output because of the multiplier effect.

Accepted Answer

A) True 
 B)False

Question 4

-Refer to Figure 11.4. Which diagram illustrates the effect of a decrease in the income tax rate?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 5

As we move along a planned expenditures line

Accepted Answer

A)  price level rises. 
B)  price level falls. 
C)  price level is held constant. 
D)  price level fluctuates depending on whether the economy is expanding or contracting. 
A)  price level rises. 
B)  price level falls. 
C)  price level is held constant. 
D)  price level fluctuates depending on whether the economy is expanding or contracting.

Question 6

The balanced-budget multiplier is calculated as the government spending multiplier minus the tax multiplier.

Accepted Answer

A) True 
 B)False

Question 7

The income-expenditure model is best used for short-run analysis of economic fluctuations.

Accepted Answer

A) True 
 B)False

Question 8

All else equal, if autonomous consumption ________, the value of the multiplier remains constant.

Accepted Answer

A)  decreases 
B)  increases 
C)  remains constant 
D)  all of the above 
A)  decreases 
B)  increases 
C)  remains constant 
D)  all of the above

Question 9

The income-expenditure model focuses on changes in

Accepted Answer

A)  output levels. 
B)  price. 
C)  import restrictions. 
D)  operational lags. 
A)  output levels. 
B)  price. 
C)  import restrictions. 
D)  operational lags.

Question 10

The marginal propensity to save (MPS)is the

Accepted Answer

A)  fraction of income that is saved. 
B)  the ratio of additional savings to additional income. 
C)  the ratio of savings to consumption. 
D)  savings that is not based on the level of income. 
A)  fraction of income that is saved. 
B)  the ratio of additional savings to additional income. 
C)  the ratio of savings to consumption. 
D)  savings that is not based on the level of income.

Question 11

Autonomous consumption is

Accepted Answer

A)  the sum of consumption that depends on the level of income and consumption that does not depend on income. 
B)  the part of consumption that depends on the level of income. 
C)  the part of consumption that does not depend on income. 
D)  the relationship between consumption spending and the level of income. 
A)  the sum of consumption that depends on the level of income and consumption that does not depend on income. 
B)  the part of consumption that depends on the level of income. 
C)  the part of consumption that does not depend on income. 
D)  the relationship between consumption spending and the level of income.

Question 12

An increase in taxes will increase total planned expenditures for goods and services.

Accepted Answer

A) True 
 B)False

Question 13

-In Figure 11.1, an increase in the marginal propensity to consume is represented by a change in the consumption function from

Accepted Answer

The answer of  
-In Figure 11.1, an increase in...

Question 14

Table 11.1
  
-Refer to Table 11.1. If exports decrease by 30, what is the new equilibrium level of output?

Accepted Answer

A)  1,700 
B)  2,300 
C)  6,800 
D)  9,200 
A)  1,700 
B)  2,300 
C)  6,800 
D)  9,200

Question 15

If the MPC = 0.75, the government spending multiplier would be

Accepted Answer

A)  0.25. 
B)  -7.5. 
C)  4. 
D)  25. 
A)  0.25. 
B)  -7.5. 
C)  4. 
D)  25.

Question 16

The balanced-budget multiplier is equal to the

Accepted Answer

A)  government spending multiplier plus the tax multiplier. 
B)  the autonomous spending multiplier. 
C)  simple multiplier minus the tax multiplier. 
D)  government spending multiplier plus the simple multiplier. 
A)  government spending multiplier plus the tax multiplier. 
B)  the autonomous spending multiplier. 
C)  simple multiplier minus the tax multiplier. 
D)  government spending multiplier plus the simple multiplier.

Question 17

If a policymaker wants to stimulate the economy, a ________ would be preferable to a ________.

Accepted Answer

A)  low MPC; high MPC 
B)  high MPC; low MPC 
C)  high MPS; low MPS 
D)  lower-valued multiplier; higher valued multiplier 
A)  low MPC; high MPC 
B)  high MPC; low MPC 
C)  high MPS; low MPS 
D)  lower-valued multiplier; higher valued multiplier

Question 18

Recall the Application about the difficulty in estimating the size of multipliers and the historical record of the size of multipliers to answer the following question(s).
-According to this Application, based on the information found by economists Robert Barro and Charles Redlick on multipliers for defense spending, increases in government spending for defense

Accepted Answer

A)  increased the economy, but by less than the amount of the government spending. 
B)  increased the economy by an average of 4 times the amount of the government spending. 
C)  increased the economy by more than 5 times the amount of the government spending. 
D)  actually decreased the size of the economy. 
A)  increased the economy, but by less than the amount of the government spending. 
B)  increased the economy by an average of 4 times the amount of the government spending. 
C)  increased the economy by more than 5 times the amount of the government spending. 
D)  actually decreased the size of the economy.

Question 19

A decrease in consumer wealth will

Accepted Answer

A)  not change autonomous consumption and rotate the consumption function upward. 
B)  not change autonomous consumption and rotate the consumption function downward. 
C)  increase autonomous consumption and shift the consumption function upward. 
D)  decrease autonomous consumption and shift the consumption function downward. 
A)  not change autonomous consumption and rotate the consumption function upward. 
B)  not change autonomous consumption and rotate the consumption function downward. 
C)  increase autonomous consumption and shift the consumption function upward. 
D)  decrease autonomous consumption and shift the consumption function downward.

Question 20

Let C = 80 + 0.6y and I = 40. The value of the MPS is

Accepted Answer

A)  0.24. 
B)  0.4. 
C)  0.48. 
D)  0.6. 
A)  0.24. 
B)  0.4. 
C)  0.48. 
D)  0.6.

The marginal propensity to consume (MPC)is the fraction of additional income that is spent.

John Maynard Keynes argued that the fundamental problem which led to the world depression was

Increases in investment exceed increases in output because of the multiplier effect.

-Refer to Figure 11.4. Which diagram illustrates the effect of a decrease in the income tax rate?

As we move along a planned expenditures line

The balanced-budget multiplier is calculated as the government spending multiplier minus the tax multiplier.

The income-expenditure model is best used for short-run analysis of economic fluctuations.

All else equal, if autonomous consumption ________, the value of the multiplier remains constant.

The income-expenditure model focuses on changes in

The marginal propensity to save (MPS)is the

Autonomous consumption is

An increase in taxes will increase total planned expenditures for goods and services.

-In Figure 11.1, an increase in the marginal propensity to consume is represented by a change in the consumption function from

Table 11.1 -Refer to Table 11.1. If exports decrease by 30, what is the new equilibrium level of output?

If the MPC = 0.75, the government spending multiplier would be

The balanced-budget multiplier is equal to the

If a policymaker wants to stimulate the economy, a would be preferable to a .

A decrease in consumer wealth will

Let C = 80 + 0.6y and I = 40. The value of the MPS is

Introduction: What Is Economics?

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nation's Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow?

Aggregate Demand and Aggregate Supply

Fiscal Policy

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Exam 11: The Income-Expenditure Model

The marginal propensity to consume (MPC)is the fraction of additional income that is spent.

John Maynard Keynes argued that the fundamental problem which led to the world depression was

Increases in investment exceed increases in output because of the multiplier effect.

-Refer to Figure 11.4. Which diagram illustrates the effect of a decrease in the income tax rate?

As we move along a planned expenditures line

The balanced-budget multiplier is calculated as the government spending multiplier minus the tax multiplier.

The income-expenditure model is best used for short-run analysis of economic fluctuations.

All else equal, if autonomous consumption ________, the value of the multiplier remains constant.

The income-expenditure model focuses on changes in

The marginal propensity to save (MPS)is the

Autonomous consumption is

An increase in taxes will increase total planned expenditures for goods and services.

-In Figure 11.1, an increase in the marginal propensity to consume is represented by a change in the consumption function from

Table 11.1 -Refer to Table 11.1. If exports decrease by 30, what is the new equilibrium level of output?

If the MPC = 0.75, the government spending multiplier would be

The balanced-budget multiplier is equal to the

If a policymaker wants to stimulate the economy, a ________ would be preferable to a ________.

A decrease in consumer wealth will

Let C = 80 + 0.6y and I = 40. The value of the MPS is

Introduction: What Is Economics?

The Key Principles of Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nation's Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow?

Aggregate Demand and Aggregate Supply

Fiscal Policy

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

If a policymaker wants to stimulate the economy, a would be preferable to a .