Question 1

(Advanced analysis) The equation for the given saving schedule is

Accepted Answer

A)  Yd = −20 + 0.8S. 
B)  Yd = 20 + 0.2S. 
C)  S = −20 + 0.2Yd. 
D)  S = 20 + 0.8Yd. 
A)  Yd = −20 + 0.8S. 
B)  Yd = 20 + 0.2S. 
C)  S = −20 + 0.2Yd. 
D)  S = 20 + 0.8Yd.

Question 2

The multiplier is deﬁned as

Accepted Answer

A)  1 − MPS. 
B)  change in GDP × initial change in spending. 
C)  change in GDP / initial change in spending. 
D)  change in GDP − initial change in spending. 
A)  1 − MPS. 
B)  change in GDP × initial change in spending. 
C)  change in GDP / initial change in spending. 
D)  change in GDP − initial change in spending.

Question 3

The wealth effect is shown graphically as a

Accepted Answer

A)  shift of the consumption schedule. 
B)  movement along an existing consumption schedule. 
C)  shift of the investment schedule. 
D)  movement along an existing investment schedule. 
A)  shift of the consumption schedule. 
B)  movement along an existing consumption schedule. 
C)  shift of the investment schedule. 
D)  movement along an existing investment schedule.

Question 4

Investment spending in the United States tends to be unstable because

Accepted Answer

A)  expected proﬁts are highly variable. 
B)  capital goods are durable. 
C)  innovation occurs at an irregular pace. 
D)  all of the factors mentioned in other answers contribute to the instability. 
A)  expected proﬁts are highly variable. 
B)  capital goods are durable. 
C)  innovation occurs at an irregular pace. 
D)  all of the factors mentioned in other answers contribute to the instability.

Question 5

If the marginal propensity to save is 0.2 in an economy, a $20 billion rise in investment spending will increase

Accepted Answer

A)  GDP by $120 billion. 
B)  GDP by $20 billion. 
C)  saving by $25 billion. 
D)  consumption by $80 billion. 
A)  GDP by $120 billion. 
B)  GDP by $20 billion. 
C)  saving by $25 billion. 
D)  consumption by $80 billion.

Question 6

The relationship between the MPS and the MPC is such that

Accepted Answer

A)  MPC − MPS = 1. 
B)  MPS/MPC = 1. 
C)  1 − MPC = MPS. 
D)  MPC − 1 = MPS. 
A)  MPC − MPS = 1. 
B)  MPS/MPC = 1. 
C)  1 − MPC = MPS. 
D)  MPC − 1 = MPS.

Question 7

The most important determinant of consumer spending is

Accepted Answer

A)  the level of household borrowing. 
B)  consumer expectations. 
C)  the stock of wealth. 
D)  the level of income. 
A)  the level of household borrowing. 
B)  consumer expectations. 
C)  the stock of wealth. 
D)  the level of income.

Question 8

Assume that for the entire business sector of a private closed economy, there are $0 worth of investment projects that will yield an expected rate of return of 25 percent or more. But there are $15
Worth of investments that will yield an expected rate of return of 20-25 percent, another $15 with an
Expected rate of return of 15-20 percent, and an additional $15 of investment projects in each
Successive rate of return range down to and including the 0-5 percent range. The expected rate of
Return curve

Accepted Answer

A)  shows a direct relationship between the interest rate and investment. 
B)  is also the investment demand curve. 
C)  is indeterminate. 
D)  implies a direct (positive) relationship between the interest rate and the level of GDP. 
A)  shows a direct relationship between the interest rate and investment. 
B)  is also the investment demand curve. 
C)  is indeterminate. 
D)  implies a direct (positive) relationship between the interest rate and the level of GDP.

Question 9

If the Hennige family's marginal propensity to consume is 0.70, then it will necessarily consume seven-
tenths of its total income.

Accepted Answer

A) True 
 B)False

Question 10

Refer to the diagram. At disposable income level D, the average propensity to save is equal to

Accepted Answer

A)  CD/BD. 
B)  CD/0D. 
C)  0D/CD. 
D)  0A/0B. 
A)  CD/BD. 
B)  CD/0D. 
C)  0D/CD. 
D)  0A/0B.

Question 11

Refer to the diagram. The average propensity to consume

Accepted Answer

A)  is greater than 1 at all levels of disposable income above $100. 
B)  is greater than 1 at all levels of disposable income below $100. 
C)  is equal to the average propensity to save. 
D)  cannot be determined from the information given. 
A)  is greater than 1 at all levels of disposable income above $100. 
B)  is greater than 1 at all levels of disposable income below $100. 
C)  is equal to the average propensity to save. 
D)  cannot be determined from the information given.

Question 12

If the slope of the consumption schedule is 0.75, then the slope of the saving schedule

Accepted Answer

A)  is 0.25. 
B)  is 0.75. 
C)  is 1.25. 
D)  cannot be determined from the data. 
A)  is 0.25. 
B)  is 0.75. 
C)  is 1.25. 
D)  cannot be determined from the data.

Question 13

If the inﬂation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is

Accepted Answer

A)  2 percent. 
B)  zero percent. 
C)  10 percent. 
D)  22 percent. 
A)  2 percent. 
B)  zero percent. 
C)  10 percent. 
D)  22 percent.

Question 14

If 100 percent of any change in income is spent, the multiplier will be

Accepted Answer

A)  equal to the MPC. 
B)  1. 
C)  zero. 
D)  inﬁnitely large. 
A)  equal to the MPC. 
B)  1. 
C)  zero. 
D)  inﬁnitely large.

Question 15

A decline in the real interest rate will shift the investment demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 16

Refer to the given diagram. Consumption will be equal to income at

Accepted Answer

A)  an income of E. 
B)  an income of F. 
C)  point C. 
D)  point D. 
A)  an income of E. 
B)  an income of F. 
C)  point C. 
D)  point D.

Question 17

Which of the following will not cause the consumption schedule to shift?

Accepted Answer

A)  a sharp increase in the amount of wealth held by households 
B)  a change in consumer incomes 
C)  the expectation of a recession 
D)  a growing expectation that consumer durables will be increasing in price soon 
A)  a sharp increase in the amount of wealth held by households 
B)  a change in consumer incomes 
C)  the expectation of a recession 
D)  a growing expectation that consumer durables will be increasing in price soon

Question 18

Economists widely agree that the value of the real-world multiplier is 2.5.

Accepted Answer

A) True 
 B)False

Question 19

The multiplier shows the relationship between changes in a component of spending, say, investment,
and the consequent changes in real income and output.

Accepted Answer

A) True 
 B)False

Question 20

The most important determinant of consumption and saving is the

Accepted Answer

A)  level of bank credit. 
B)  level of income. 
C)  interest rate. 
D)  price level. 
A)  level of bank credit. 
B)  level of income. 
C)  interest rate. 
D)  price level.

(Advanced analysis) The equation for the given saving schedule is

The multiplier is deﬁned as

The wealth effect is shown graphically as a

Investment spending in the United States tends to be unstable because

If the marginal propensity to save is 0.2 in an economy, a $20 billion rise in investment spending will increase

The relationship between the MPS and the MPC is such that

The most important determinant of consumer spending is

If the Hennige family's marginal propensity to consume is 0.70, then it will necessarily consume seven- tenths of its total income.

Refer to the diagram. At disposable income level D, the average propensity to save is equal to

Refer to the diagram. The average propensity to consume

If the slope of the consumption schedule is 0.75, then the slope of the saving schedule

If the inﬂation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is

If 100 percent of any change in income is spent, the multiplier will be

A decline in the real interest rate will shift the investment demand curve to the right.

Refer to the given diagram. Consumption will be equal to income at

Which of the following will not cause the consumption schedule to shift?

Economists widely agree that the value of the real-world multiplier is 2.5.

The multiplier shows the relationship between changes in a component of spending, say, investment, and the consequent changes in real income and output.

The most important determinant of consumption and saving is the

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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Exam 10: Basic Macroeconomic Relationships

(Advanced analysis) The equation for the given saving schedule is

The multiplier is deﬁned as

The wealth effect is shown graphically as a

Investment spending in the United States tends to be unstable because

If the marginal propensity to save is 0.2 in an economy, a $20 billion rise in investment spending will increase

The relationship between the MPS and the MPC is such that

The most important determinant of consumer spending is

If the Hennige family's marginal propensity to consume is 0.70, then it will necessarily consume seven- tenths of its total income.

Refer to the diagram. At disposable income level D, the average propensity to save is equal to

Refer to the diagram. The average propensity to consume

If the slope of the consumption schedule is 0.75, then the slope of the saving schedule

If the inﬂation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is

If 100 percent of any change in income is spent, the multiplier will be

A decline in the real interest rate will shift the investment demand curve to the right.

Refer to the given diagram. Consumption will be equal to income at

Which of the following will not cause the consumption schedule to shift?

Economists widely agree that the value of the real-world multiplier is 2.5.

The multiplier shows the relationship between changes in a component of spending, say, investment, and the consequent changes in real income and output.

The most important determinant of consumption and saving is the

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters