Question 1

New residential housing is placed under consumer expenditures in aggregate demand.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following would is included as Investment Spending in aggregate demand?

Accepted Answer

A) Sandra finances her business from the sale of $200,000 of treasury securities. 
B) Marco buys a new building off the Santa Monica coast for his startup. 
C) Maria purchases $100,000 of foreign bonds. 
D) Allen sells the old truck he used for transporting goods. 
A) Sandra finances her business from the sale of $200,000 of treasury securities. 
B) Marco buys a new building off the Santa Monica coast for his startup. 
C) Maria purchases $100,000 of foreign bonds. 
D) Allen sells the old truck he used for transporting goods.

Question 3

When GDP is calculated as the final demand for goods and services by consumers, businesses, governments, and foreigners, then GDP is measured by

Accepted Answer

A) the sum of all value added. 
B) the sum of all productive resource inputs. 
C) the sum of all factor payments. 
D) the sum of final goods and services. 
A) the sum of all value added. 
B) the sum of all productive resource inputs. 
C) the sum of all factor payments. 
D) the sum of final goods and services.

Question 4

Figure 8-1
​  
-The slope of the fitted line that shows the relationship between consumer spending and disposable income is the

Accepted Answer

A) marginal propensity to save. 
B) probability of expending. 
C) marginal income spend. 
D) marginal propensity to consume. 
A) marginal propensity to save. 
B) probability of expending. 
C) marginal income spend. 
D) marginal propensity to consume.

Question 5

Figure 8-1
​  
-Given the scatter diagram in Figure 8-1, if real disposable income is $600 billion and asset wealth increases by $100 billion, how much will consumers spend?

Accepted Answer

A) $550 billion 
B) $450 billion 
C) $600 billion 
D) Cannot be determined 
A) $550 billion 
B) $450 billion 
C) $600 billion 
D) Cannot be determined

Question 6

The marginal propensity to consume is calculated by dividing the change in consumer spending by the change in disposable income.

Accepted Answer

A) True 
 B)False

Question 7

Discuss the major determinants of net exports.

Accepted Answer

National incomes: Although both exports

Question 8

Whirlpool Corporation buys steel in sheets to manufacture refrigerators.Whirlpool also buys a new factory and a metal press to mold the steel.Which purchases are included in GDP?

Accepted Answer

A) The steel 
B) The steel, the factory, and the metal press 
C) The factory and the metal press 
D) The steel and the metal press 
A) The steel 
B) The steel, the factory, and the metal press 
C) The factory and the metal press 
D) The steel and the metal press

Question 9

An increase in stock prices will be a(n)

Accepted Answer

A) movement along the consumption function. 
B) movement down along the consumption function. 
C) downward shift of the consumption function. 
D) upward shift of the consumption function. 
A) movement along the consumption function. 
B) movement down along the consumption function. 
C) downward shift of the consumption function. 
D) upward shift of the consumption function.

Question 10

Why do permanent tax cuts have a greater impact on consumption than temporary tax cuts?

Accepted Answer

A) Permanent tax cuts have a greater effect on expected long-run inflation. 
B) Permanent tax cuts are perceived as minor while temporary tax cuts are larger and more effective. 
C) Permanent tax cuts cause movement along the consumption function, while temporary tax cuts shift the consumption function. 
D) Permanent tax cuts affect expectations of long-run income more than temporary tax cuts. 
A) Permanent tax cuts have a greater effect on expected long-run inflation. 
B) Permanent tax cuts are perceived as minor while temporary tax cuts are larger and more effective. 
C) Permanent tax cuts cause movement along the consumption function, while temporary tax cuts shift the consumption function. 
D) Permanent tax cuts affect expectations of long-run income more than temporary tax cuts.

Question 11

The U.S.experience with tax cuts and tax increases since 1975 suggests that

Accepted Answer

A) tax cuts always stimulate consumption spending. 
B) tax changes have a stable and predictable effect on consumption spending. 
C) temporary tax changes are less effective than permanent changes. 
D) tax changes have no effect on consumption spending. 
A) tax cuts always stimulate consumption spending. 
B) tax changes have a stable and predictable effect on consumption spending. 
C) temporary tax changes are less effective than permanent changes. 
D) tax changes have no effect on consumption spending.

Question 12

A once-and-for-all jump in the price level would initially cause a(n)

Accepted Answer

A) upward shift in the consumption function. 
B) upward movement along the consumption function. 
C) downward shift in the consumption function. 
D) downward movement along the consumption function. 
A) upward shift in the consumption function. 
B) upward movement along the consumption function. 
C) downward shift in the consumption function. 
D) downward movement along the consumption function.

Question 13

If you suddenly have the misfortune of screening positive for lung cancer, then your consumption function will most likely

Accepted Answer

A) shift upward. 
B) shift downward. 
C) not shift, your disposable income does not change. 
D) not shift, but force you to increase your expenditures along the consumption function. 
A) shift upward. 
B) shift downward. 
C) not shift, your disposable income does not change. 
D) not shift, but force you to increase your expenditures along the consumption function.

Question 14

Inventories are included in GDP because

Accepted Answer

A) they are value added to final goods. 
B) they were produced and are sold in their final form. 
C) they will depreciate. 
D) they are considered government spending. 
A) they are value added to final goods. 
B) they were produced and are sold in their final form. 
C) they will depreciate. 
D) they are considered government spending.

Question 15

Suppose your expectations of long-run income decreases, this will most likely

Accepted Answer

A) decrease your consumption function. 
B) increase your consumption function. 
C) increase your short-run debt. 
D) decrease your short-run debt. 
A) decrease your consumption function. 
B) increase your consumption function. 
C) increase your short-run debt. 
D) decrease your short-run debt.

Question 16

Which of the following would be most likely to shift the consumption function downward?

Accepted Answer

A) A stock market crash 
B) A price level decrease 
C) Increased corporate profits 
D) A stock market boom 
A) A stock market crash 
B) A price level decrease 
C) Increased corporate profits 
D) A stock market boom

Question 17

The relationship between consumer spending and disposable income is called the

Accepted Answer

A) conjunction function. 
B) consumption function. 
C) aggregate demand function. 
D) marginal spending function. 
A) conjunction function. 
B) consumption function. 
C) aggregate demand function. 
D) marginal spending function.

Question 18

Explain why national income and domestic product must be equal.

Accepted Answer

When a firm produces goods and sells the

Question 19

Plant, equipment, software, new housing, and inventories are part of

Accepted Answer

A) gross national product. 
B) the value-added approach of calculating GDP. 
C) gross private domestic investment. 
D) net exports. 
A) gross national product. 
B) the value-added approach of calculating GDP. 
C) gross private domestic investment. 
D) net exports.

Question 20

Suppose your consumption function shifts downward.This can be caused by if the consumption function shifts downward, which of the following is the most likely cause?

Accepted Answer

A) An increase to the price level 
B) An increase to your disposable income 
C) A decrease to the interest rate 
D) A decrease in housing prices 
A) An increase to the price level 
B) An increase to your disposable income 
C) A decrease to the interest rate 
D) A decrease in housing prices

Exam 24: Aggregate Demand and the Powerful Consumer

New residential housing is placed under consumer expenditures in aggregate demand.

Which of the following would is included as Investment Spending in aggregate demand?

When GDP is calculated as the final demand for goods and services by consumers, businesses, governments, and foreigners, then GDP is measured by

Figure 8-1 ​ -The slope of the fitted line that shows the relationship between consumer spending and disposable income is the

Figure 8-1 ​ -Given the scatter diagram in Figure 8-1, if real disposable income is $600 billion and asset wealth increases by $100 billion, how much will consumers spend?

The marginal propensity to consume is calculated by dividing the change in consumer spending by the change in disposable income.

Discuss the major determinants of net exports.

Whirlpool Corporation buys steel in sheets to manufacture refrigerators.Whirlpool also buys a new factory and a metal press to mold the steel.Which purchases are included in GDP?

An increase in stock prices will be a(n)

Why do permanent tax cuts have a greater impact on consumption than temporary tax cuts?

The U.S.experience with tax cuts and tax increases since 1975 suggests that

A once-and-for-all jump in the price level would initially cause a(n)

If you suddenly have the misfortune of screening positive for lung cancer, then your consumption function will most likely

Inventories are included in GDP because

Suppose your expectations of long-run income decreases, this will most likely

Which of the following would be most likely to shift the consumption function downward?

The relationship between consumer spending and disposable income is called the

Explain why national income and domestic product must be equal.

Plant, equipment, software, new housing, and inventories are part of

Suppose your consumption function shifts downward.This can be caused by if the consumption function shifts downward, which of the following is the most likely cause?

What Is Economics

The Economony: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Contemporary Issues in the Useconomy

Filters

Figure 8-1 -The slope of the fitted line that shows the relationship between consumer spending and disposable income is the

Figure 8-1 -Given the scatter diagram in Figure 8-1, if real disposable income is $600 billion and asset wealth increases by $100 billion, how much will consumers spend?