Question 1

The nation's disposable income increases by $400 billion and, as a result, consumer spending increases by $320 billion.Therefore, the MPC equals

Accepted Answer

A) 0.16. 
B) 0.20. 
C) 0.60. 
D) 0.80. 
E) 0.96. 
A) 0.16. 
B) 0.20. 
C) 0.60. 
D) 0.80. 
E) 0.96.

Question 2

Aggregate demand is defined as the total spending

Accepted Answer

A) of all consumers, business firms, government agencies, and foreigners on final goods and services produced in the United States. 
B) by all consumers, business firms, government agencies, and foreigners in the United States. 
C) consumers, businesses, government agencies, and foreigners wish to make in one year. 
D) of consumers, businesses, and government agencies on final output. 
A) of all consumers, business firms, government agencies, and foreigners on final goods and services produced in the United States. 
B) by all consumers, business firms, government agencies, and foreigners in the United States. 
C) consumers, businesses, government agencies, and foreigners wish to make in one year. 
D) of consumers, businesses, and government agencies on final output.

Question 3

Households can finance their consumer spending from current

Accepted Answer

A) income. 
B) wealth. 
C) debt. 
D) income and current wealth. 
A) income. 
B) wealth. 
C) debt. 
D) income and current wealth.

Question 4

Retirement savings allows retirees to consume more of their disposable income because

Accepted Answer

A) they have a better work ethic than the young. 
B) they have better credit histories than the young. 
C) they can withdraw from their retirement savings accounts. 
D) they do not have debt. 
A) they have a better work ethic than the young. 
B) they have better credit histories than the young. 
C) they can withdraw from their retirement savings accounts. 
D) they do not have debt.

Question 5

The national income accounts include a value for the amount of capital stock "used up" during the production of current output.This dollar amount is called

Accepted Answer

A) appreciation. 
B) dollarization. 
C) amortization. 
D) depreciation. 
A) appreciation. 
B) dollarization. 
C) amortization. 
D) depreciation.

Question 6

A savings account is an example of consumer income.

Accepted Answer

A) True 
 B)False

Question 7

National income and domestic product must be equal.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following will most likely cause a shift in the consumption function?

Accepted Answer

A) A change in consumer confidence 
B) A change in national output 
C) A change in real GDP 
D) A change in disposable income 
A) A change in consumer confidence 
B) A change in national output 
C) A change in real GDP 
D) A change in disposable income

Question 9

Aggregate demand is the total demand for the final goods and services produced in an economy.

Accepted Answer

A) True 
 B)False

Question 10

Figure 8-1
​  
-Given the scatter diagram in Figure 8-1, what is the MPC (your best estimate)?

Accepted Answer

A) 1/2 
B) 1/3 
C) 2/3 
D) 1 
A) 1/2 
B) 1/3 
C) 2/3 
D) 1

Question 11

Why is investment spending a highly volatile component?

Accepted Answer

Several factors influence how much busin

Question 12

Changes in the price level will shift the consumption function, since it is an indicator of household wealth and not household income.

Accepted Answer

A) True 
 B)False

Question 13

One difficulty of computing the value of GDP is that there are no market prices for

Accepted Answer

A) exports and imports. 
B) business investments. 
C) government goods and services. 
D) resource values. 
A) exports and imports. 
B) business investments. 
C) government goods and services. 
D) resource values.

Question 14

What is the marginal propensity to consume (MPC) and why is it important in predicting consumer behavior?

Accepted Answer

The marginal propensity to consume is th

Question 15

In Macronesia, the MPC is approximately 0.80.If disposable income changes from 1,000 billion pukas to 1,500 billion pukas, then consumption will change by a(n)

Accepted Answer

A) decrease of 500 billion pukas. 
B) increase of 500 billion pukas. 
C) increase of 400 billion pukas. 
D) increase of 800 billion pukas. 
A) decrease of 500 billion pukas. 
B) increase of 500 billion pukas. 
C) increase of 400 billion pukas. 
D) increase of 800 billion pukas.

Question 16

The temporary tax cuts of 2008 and 2009 were ineffective to boost the economy out of a recession.

Accepted Answer

A) True 
 B)False

Question 17

According to the relationship represented by the consumption function, governments can indirectly decrease consumption spending by

Accepted Answer

A) increasing taxes. 
B) decreasing transfers. 
C) decreasing taxes. 
D) decreasing government spending. 
A) increasing taxes. 
B) decreasing transfers. 
C) decreasing taxes. 
D) decreasing government spending.

Question 18

Changes in the value of stocks may play a big role in the consumption decisions of individuals.How would changes in the stock market affect the consumption function?

Accepted Answer

Corporate stocks are an increasingly pop

Question 19

The marginal propensity to consume (MPC) is calculated by which formula?

Accepted Answer

A) MPC = change in DI divided by change in C 
B) MPC = change in GDP divided by change in DI 
C) MPC = change in C divided by change in DI 
D) MPC = change in C divided by change in GDP 
A) MPC = change in DI divided by change in C 
B) MPC = change in GDP divided by change in DI 
C) MPC = change in C divided by change in DI 
D) MPC = change in C divided by change in GDP

Question 20

The "investment" component of aggregate demand will include all of the following except

Accepted Answer

A) expenditures of business firms on new plants. 
B) expenditures of business firms on new equipment. 
C) resales of existing physical assets. 
D) household spending on new homes. 
A) expenditures of business firms on new plants. 
B) expenditures of business firms on new equipment. 
C) resales of existing physical assets. 
D) household spending on new homes.

Exam 24: Aggregate Demand and the Powerful Consumer

The nation's disposable income increases by $400 billion and, as a result, consumer spending increases by $320 billion.Therefore, the MPC equals

Aggregate demand is defined as the total spending

Households can finance their consumer spending from current

Retirement savings allows retirees to consume more of their disposable income because

The national income accounts include a value for the amount of capital stock "used up" during the production of current output.This dollar amount is called

A savings account is an example of consumer income.

National income and domestic product must be equal.

Which of the following will most likely cause a shift in the consumption function?

Aggregate demand is the total demand for the final goods and services produced in an economy.

Figure 8-1 ​ -Given the scatter diagram in Figure 8-1, what is the MPC (your best estimate)?

Why is investment spending a highly volatile component?

Changes in the price level will shift the consumption function, since it is an indicator of household wealth and not household income.

One difficulty of computing the value of GDP is that there are no market prices for

What is the marginal propensity to consume (MPC) and why is it important in predicting consumer behavior?

In Macronesia, the MPC is approximately 0.80.If disposable income changes from 1,000 billion pukas to 1,500 billion pukas, then consumption will change by a(n)

The temporary tax cuts of 2008 and 2009 were ineffective to boost the economy out of a recession.

According to the relationship represented by the consumption function, governments can indirectly decrease consumption spending by

Changes in the value of stocks may play a big role in the consumption decisions of individuals.How would changes in the stock market affect the consumption function?

The marginal propensity to consume (MPC) is calculated by which formula?

The "investment" component of aggregate demand will include all of the following except

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 -Given the scatter diagram in Figure 8-1, what is the MPC (your best estimate)?