Question 1

If a household's disposable income increases from $50,000 to $100,000 and its consumption increases from $40,000 to $80,000, the MPS must be _____.

Accepted Answer

A)  0.4 
B)  0.8 
C)  0.7 
D)  0.2 
E)  0.5 
A)  0.4 
B)  0.8 
C)  0.7 
D)  0.2 
E)  0.5 D

Question 2

What would be the impact of an increase in foreign income on the net export function?

Accepted Answer

A)  The net export function would shift upward. 
B)  The net export function would shift downward. 
C)  The slope of the net export function would increase. 
D)  The slope of the net export function would decrease. 
E)  There would be a movement up along the net export function. 
A)  The net export function would shift upward. 
B)  The net export function would shift downward. 
C)  The slope of the net export function would increase. 
D)  The slope of the net export function would decrease. 
E)  There would be a movement up along the net export function. B

Question 3

The figure given below represents the saving function of an economy.
Figure 9.1
  
-Refer to Figure 9.1. Which of the following statements is true for real GDP levels below $400 billion?

Accepted Answer

A)  Saving exists because consumption is smaller than disposable income. 
B)  Saving does not exist because consumption exceeds disposable income. 
C)  The corresponding section of the consumption function lies below the 45-degree line. 
D)  Autonomous consumption is equal to zero. 
E)  The slope of the consumption function becomes negative. 
A)  Saving exists because consumption is smaller than disposable income. 
B)  Saving does not exist because consumption exceeds disposable income. 
C)  The corresponding section of the consumption function lies below the 45-degree line. 
D)  Autonomous consumption is equal to zero. 
E)  The slope of the consumption function becomes negative. B

Question 4

Other things equal, a decrease in the cost of capital would be associated with an upward shift of the investment function and, hence, with a rise in aggregate expenditures.

Accepted Answer

A) True 
 B)False

Question 5

The consumption function becomes flatter if:

Accepted Answer

A)  the average propensity to spend increases. 
B)  the marginal propensity to spend increases. 
C)  the marginal propensity to save increases. 
D)  the autonomous consumption increases. 
E)  the autonomous consumption decreases. 
A)  the average propensity to spend increases. 
B)  the marginal propensity to spend increases. 
C)  the marginal propensity to save increases. 
D)  the autonomous consumption increases. 
E)  the autonomous consumption decreases.

Question 6

The marginal propensity to consume (MPC) is equal to the inverse of the marginal propensity to save (MPS).

Accepted Answer

A) True 
 B)False

Question 7

An increase in disposable income will cause autonomous consumption to rise.

Accepted Answer

A) True 
 B)False

Question 8

The second-largest component of aggregate expenditures in the United States is _____.

Accepted Answer

A)  consumption. 
B)  investment 
C)  government expenditure 
D)  imports 
E)  exports 
A)  consumption. 
B)  investment 
C)  government expenditure 
D)  imports 
E)  exports

Question 9

In the table given below Y represent the aggregate expenditure of the economy on C = consumption, I = investment, G = government projects, and X = net exports.
Table 9.3
 $\begin{array}{c}
\text { Aggregate Expenditures }\
\begin{array}{|c|c|c|c|c|}
\hline \mathbf{Y} & \mathbf{C} & \mathbf{I} & \mathbf{G} & \mathbf{X} \
\hline \$ 0 & \$ 50 & \$ 75 & \$ 150 & \$ 40 \
\hline \$ 150 & \$ 125 & \$ 75 & \$ 150 & \$ 10 \
\hline \$ 300 & \$ 200 & \$ 75 & \$ 150 & -\$ 20 \
\hline \$ 450 & \$ 275 & \$ 75 & \$ 150 & -\$ 50 \
\hline \$ 600 & \$ 350 & \$ 75 & \$ 150 & -\$ 80 \
\hline
\end{array}
\end{array}$
-Refer to Table 9.3. Compute the marginal propensity to save in the economy.

Accepted Answer

A)  0.10 
B)  0.20 
C)  0.25 
D)  0.50 
E)  0.75 
A)  0.10 
B)  0.20 
C)  0.25 
D)  0.50 
E)  0.75

Question 10

Other things equal, a marginal propensity to import of 0.8 implies that a $100 million increase in domestic income will lead to an $80 million decrease in net exports.

Accepted Answer

A) True 
 B)False

Question 11

The figure given below shows the consumption function of a household.
Figure 9.2
  
-In Figure 9.2, at any point to the left of point B:

Accepted Answer

A)  autonomous consumption is less than zero. 
B)  saving occurs. 
C)  disposable income is negative 
D)  consumption is greater than disposable income. 
E)  autonomous consumption is zero. 
A)  autonomous consumption is less than zero. 
B)  saving occurs. 
C)  disposable income is negative 
D)  consumption is greater than disposable income. 
E)  autonomous consumption is zero.

Question 12

The figure given below represents the saving function of an economy.
Figure 9.1
  
-Refer to Figure 9.1. At the real GDP level of $400 billion, which of the following statements is true?

Accepted Answer

A)  There is dissaving. 
B)  Saving is equal to $10 billion. 
C)  Consumption is equal to disposable income. 
D)  The slope of the saving function is equal to zero. 
E)  The slope of the consumption function is equal to zero. 
A)  There is dissaving. 
B)  Saving is equal to $10 billion. 
C)  Consumption is equal to disposable income. 
D)  The slope of the saving function is equal to zero. 
E)  The slope of the consumption function is equal to zero.

Question 13

The consumption function has a positive slope while the savings function has a negative slope.

Accepted Answer

A) True 
 B)False

Question 14

In the table given below Y represent the aggregate expenditure of the economy on C = consumption, I = investment, G = government projects, and X = net exports.
Table 9.3
 $\begin{array}{c}
\text { Aggregate Expenditures }\
\begin{array}{|c|c|c|c|c|}
\hline \mathbf{Y} & \mathbf{C} & \mathbf{I} & \mathbf{G} & \mathbf{X} \
\hline \$ 0 & \$ 50 & \$ 75 & \$ 150 & \$ 40 \
\hline \$ 150 & \$ 125 & \$ 75 & \$ 150 & \$ 10 \
\hline \$ 300 & \$ 200 & \$ 75 & \$ 150 & -\$ 20 \
\hline \$ 450 & \$ 275 & \$ 75 & \$ 150 & -\$ 50 \
\hline \$ 600 & \$ 350 & \$ 75 & \$ 150 & -\$ 80 \
\hline
\end{array}
\end{array}$
-According to Table 9.3, what is the marginal propensity to import?

Accepted Answer

A)  -0.20 
B)  0.40 
C)  -0.50 
D)  0.75 
E)  -0.80 
A)  -0.20 
B)  0.40 
C)  -0.50 
D)  0.75 
E)  -0.80

Question 15

The sum of the MPC and the MPS is always:

Accepted Answer

A)  greater than 1. 
B)  less than 1. 
C)  equal to 1. 
D)  equal to zero. 
E)  between 0 and 1. 
A)  greater than 1. 
B)  less than 1. 
C)  equal to 1. 
D)  equal to zero. 
E)  between 0 and 1.

Question 16

In the table given below Y represent the aggregate expenditure of the economy on C = consumption, I = investment, G = government projects, and X = net exports.
Table 9.3
 $\begin{array}{c}
\text { Aggregate Expenditures }\
\begin{array}{|c|c|c|c|c|}
\hline \mathbf{Y} & \mathbf{C} & \mathbf{I} & \mathbf{G} & \mathbf{X} \
\hline \$ 0 & \$ 50 & \$ 75 & \$ 150 & \$ 40 \
\hline \$ 150 & \$ 125 & \$ 75 & \$ 150 & \$ 10 \
\hline \$ 300 & \$ 200 & \$ 75 & \$ 150 & -\$ 20 \
\hline \$ 450 & \$ 275 & \$ 75 & \$ 150 & -\$ 50 \
\hline \$ 600 & \$ 350 & \$ 75 & \$ 150 & -\$ 80 \
\hline
\end{array}
\end{array}$
-Refer to Table 9.3. The intercept of the C+ I+ G+ X function is at an aggregate expenditures level of:

Accepted Answer

A)  $125. 
B)  $150. 
C)  $275. 
D)  $315. 
E)  $335. 
A)  $125. 
B)  $150. 
C)  $275. 
D)  $315. 
E)  $335.

Question 17

Identify the correct statement with respect to consumption and saving function.

Accepted Answer

A)  Both the consumption function and the saving function have negative slopes. 
B)  As disposable income declines, consumption and saving increase. 
C)  The consumption function has a negative slope while the saving function has a positive slope. 
D)  As disposable income rises, consumption and saving increase. 
E)  The consumption function has a positive slope while the saving function has a negative slope. 
A)  Both the consumption function and the saving function have negative slopes. 
B)  As disposable income declines, consumption and saving increase. 
C)  The consumption function has a negative slope while the saving function has a positive slope. 
D)  As disposable income rises, consumption and saving increase. 
E)  The consumption function has a positive slope while the saving function has a negative slope.

Question 18

The table given below reports the consumption expenditure of a nation at different levels of disposable income.
Table 9.1
 $\begin{array}{|c|c|}
\hline \text { Disposable Income }\left(Y_{2}\right) & \text { Consumption }(C) \
\hline \$ {0}& \$ 4,500 \
\hline \$ 10,000 & \$ 12,000 \
\hline \$ 15,000 & \$ 15,750 \
\hline \$ 25,000 & \$ 23,250 \
\hline \$ 30,000 & \$ 27,000 \
\hline \$ 35,000 & \$ 30,750 \
\hline \$ 40,000 & \$ 34,500 \
\hline \$ 50,000 & \$ 42,000 \
\hline
\end{array}$
-Refer to Table 9.1. The income level of $18,000 coincides with:

Accepted Answer

A)  the origin of the graph. 
B)  the point where the consumption function touches the vertical axis. 
C)  the point where the MPC equals 1.00. 
D)  the point where the APC equals 1.00. 
E)  the point where the consumption function crosses the 45-degree line. 
A)  the origin of the graph. 
B)  the point where the consumption function touches the vertical axis. 
C)  the point where the MPC equals 1.00. 
D)  the point where the APC equals 1.00. 
E)  the point where the consumption function crosses the 45-degree line.

Question 19

Saving remaining constant, the average propensity to save declines with an increase in disposable income.

Accepted Answer

A) True 
 B)False

Question 20

MPI refers to the percentage of additional domestic income spent on imports.

Accepted Answer

A) True 
 B)False

If a household's disposable income increases from $50,000 to $100,000 and its consumption increases from $40,000 to $80,000, the MPS must be _____.

What would be the impact of an increase in foreign income on the net export function?

The figure given below represents the saving function of an economy. Figure 9.1 -Refer to Figure 9.1. Which of the following statements is true for real GDP levels below $400 billion?

Other things equal, a decrease in the cost of capital would be associated with an upward shift of the investment function and, hence, with a rise in aggregate expenditures.

The consumption function becomes flatter if:

The marginal propensity to consume (MPC) is equal to the inverse of the marginal propensity to save (MPS).

An increase in disposable income will cause autonomous consumption to rise.

The second-largest component of aggregate expenditures in the United States is _____.

Other things equal, a marginal propensity to import of 0.8 implies that a $100 million increase in domestic income will lead to an $80 million decrease in net exports.

The figure given below shows the consumption function of a household. Figure 9.2 -In Figure 9.2, at any point to the left of point B:

The figure given below represents the saving function of an economy. Figure 9.1 -Refer to Figure 9.1. At the real GDP level of $400 billion, which of the following statements is true?

The consumption function has a positive slope while the savings function has a negative slope.

The sum of the MPC and the MPS is always:

Identify the correct statement with respect to consumption and saving function.

Saving remaining constant, the average propensity to save declines with an increase in disposable income.

MPI refers to the percentage of additional domestic income spent on imports.

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

Exam 9: Aggregate Expenditures

If a household's disposable income increases from $50,000 to $100,000 and its consumption increases from $40,000 to $80,000, the MPS must be _____.

What would be the impact of an increase in foreign income on the net export function?

The figure given below represents the saving function of an economy. Figure 9.1 -Refer to Figure 9.1. Which of the following statements is true for real GDP levels below $400 billion?

Other things equal, a decrease in the cost of capital would be associated with an upward shift of the investment function and, hence, with a rise in aggregate expenditures.

The consumption function becomes flatter if:

The marginal propensity to consume (MPC) is equal to the inverse of the marginal propensity to save (MPS).

An increase in disposable income will cause autonomous consumption to rise.

The second-largest component of aggregate expenditures in the United States is _____.

Other things equal, a marginal propensity to import of 0.8 implies that a $100 million increase in domestic income will lead to an $80 million decrease in net exports.

The figure given below shows the consumption function of a household. Figure 9.2 -In Figure 9.2, at any point to the left of point B:

The figure given below represents the saving function of an economy. Figure 9.1 -Refer to Figure 9.1. At the real GDP level of $400 billion, which of the following statements is true?

The consumption function has a positive slope while the savings function has a negative slope.

The sum of the MPC and the MPS is always:

Identify the correct statement with respect to consumption and saving function.

Saving remaining constant, the average propensity to save declines with an increase in disposable income.

MPI refers to the percentage of additional domestic income spent on imports.

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters