Question 1

If disposable income rises from $15,000 to $20,000 and the marginal propensity to consume equals 0.9, then saving must increase by $500.

Accepted Answer

A) True 
 B)False

Question 2

The amount of autonomous consumption in an economy is measured by the:

Accepted Answer

A)  the intercept of the consumption function when disposable income is positive. 
B)  the intercept of the consumption function where actual consumption is above the 45-degree line. 
C)  the intercept of the consumption function when disposable income is zero. 
D)  the intercept of the consumption function where actual consumption is above the 45-degree line 
E)  the intercept of the consumption function when disposable income is negative 
A)  the intercept of the consumption function when disposable income is positive. 
B)  the intercept of the consumption function where actual consumption is above the 45-degree line. 
C)  the intercept of the consumption function when disposable income is zero. 
D)  the intercept of the consumption function where actual consumption is above the 45-degree line 
E)  the intercept of the consumption function when disposable income is negative

Question 3

Other things equal, when the U.S. dollar depreciates, domestic exports rise at every level of domestic income.

Accepted Answer

A) True 
 B)False

Question 4

When capacity utilization rate is high:

Accepted Answer

A)  the price level is likely to go up. 
B)  consumption is likely to go down. 
C)  investment is likely to increase. 
D)  the rate of interest is likely to decrease. 
E)  aggregate supply of goods is likely to remain constant. 
A)  the price level is likely to go up. 
B)  consumption is likely to go down. 
C)  investment is likely to increase. 
D)  the rate of interest is likely to decrease. 
E)  aggregate supply of goods is likely to remain constant.

Question 5

The United States introduced investment tax credit in 1962 and has continued to offer it till date. This has reduced the volatility of investments in the country.

Accepted Answer

A) True 
 B)False

Question 6

A change in the marginal propensity to save can be graphically represented by:

Accepted Answer

A)  a movement along the investment function. 
B)  a movement along the saving function. 
C)  a parallel shift of the consumption function. 
D)  a parallel shift of the saving function. 
E)  a change in the slope of the saving function. 
A)  a movement along the investment function. 
B)  a movement along the saving function. 
C)  a parallel shift of the consumption function. 
D)  a parallel shift of the saving function. 
E)  a change in the slope of the saving function.

Question 7

When the U.S. government removes investment tax credits:

Accepted Answer

A)  consumption spending falls. 
B)  the return on investment increases. 
C)  capacity utilization in the economy expands. 
D)  the cost of capital increases. 
E)  technological innovation advances more rapidly. 
A)  consumption spending falls. 
B)  the return on investment increases. 
C)  capacity utilization in the economy expands. 
D)  the cost of capital increases. 
E)  technological innovation advances more rapidly.

Question 8

The figure given below represents the consumption function of a country.
Figure 9.3
  
-According to Figure 9.3, saving is zero when disposable income is _____.

Accepted Answer

A)  $0 
B)  $400 
C)  $250 
D)  $800 
E)  $300 
A)  $0 
B)  $400 
C)  $250 
D)  $800 
E)  $300

Question 9

Suppose total disposable income in Country X rises by $500 billion while total consumption rises by $50 billion. What would be the slope of the consumption function for this nation?

Accepted Answer

A)  1 
B)  0.1 
C)  0.5 
D)  0.25 
E)  0.4 
A)  1 
B)  0.1 
C)  0.5 
D)  0.25 
E)  0.4

Question 10

A change in consumption caused by a change in disposable income is shown by:

Accepted Answer

A)  movement along the consumption function. 
B)  a rightward shift of the consumption function. 
C)  a change in the slope of the consumption function. 
D)  a leftward shift of the consumption function. 
E)  a change in the shape of the consumption function. 
A)  movement along the consumption function. 
B)  a rightward shift of the consumption function. 
C)  a change in the slope of the consumption function. 
D)  a leftward shift of the consumption function. 
E)  a change in the shape of the consumption function.

Question 11

The figure given below shows the consumption functions of an economy.
Figure 9.4
  
-Refer to the Figure 9.4. If the economy is in equilibrium at A, which of the following is most likely to occur if consumers expect a period of rapid economic expansion?

Accepted Answer

A)  Equilibrium will move from A to F. 
B)  Equilibrium will move from A to C. 
C)  There will be a new equilibrium disposable income at G. 
D)  Equilibrium will remain at A. 
E)  There will be a new equilibrium disposable income at E. 
A)  Equilibrium will move from A to F. 
B)  Equilibrium will move from A to C. 
C)  There will be a new equilibrium disposable income at G. 
D)  Equilibrium will remain at A. 
E)  There will be a new equilibrium disposable income at E.

Question 12

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. At an income level of $300, the average propensity to save equals:

Accepted Answer

A)  0.10. 
B)  0.23. 
C)  0.33. 
D)  0.67. 
E)  1.50. 
A)  0.10. 
B)  0.23. 
C)  0.33. 
D)  0.67. 
E)  1.50.

Question 13

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. Autonomous consumption expenditure in this nation will equal:

Accepted Answer

A)  $10,000. 
B)  $5,500. 
C)  $4,500. 
D)  $3,000. 
E)  $4,000. 
A)  $10,000. 
B)  $5,500. 
C)  $4,500. 
D)  $3,000. 
E)  $4,000.

Question 14

As a function of real GDP (real GDP being measured on the horizontal axis), autonomous investment is represented by a(n):

Accepted Answer

A)  U-shaped curve. 
B)  vertical line. 
C)  positively sloped line. 
D)  negatively sloped line. 
E)  horizontal line. 
A)  U-shaped curve. 
B)  vertical line. 
C)  positively sloped line. 
D)  negatively sloped line. 
E)  horizontal line.

Question 15

The net export function is negatively sloped because exports are inversely related to domestic income.

Accepted Answer

A) True 
 B)False

Question 16

All of the following would cause exports to decline, except:

Accepted Answer

A)  a depreciation of the domestic currency. 
B)  a decline in foreign income. 
C)  stricter government regulations on international trade. 
D)  a decline in foreign preferences for domestic goods. 
E)  foreign quotas on domestic products. 
A)  a depreciation of the domestic currency. 
B)  a decline in foreign income. 
C)  stricter government regulations on international trade. 
D)  a decline in foreign preferences for domestic goods. 
E)  foreign quotas on domestic products.

Question 17

As household wealth increases, it will experience a(n):

Accepted Answer

A)  increase in its MPC. 
B)  decrease in autonomous consumption. 
C)  decrease in its MPS. 
D)  increase in autonomous consumption. 
E)  increase in autonomous saving. 
A)  increase in its MPC. 
B)  decrease in autonomous consumption. 
C)  decrease in its MPS. 
D)  increase in autonomous consumption. 
E)  increase in autonomous saving.

Question 18

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. Calculate the marginal propensity to consume in the economy.

Accepted Answer

A)  0.25 
B)  0.50 
C)  0.75 
D)  0.80 
E)  1.25 
A)  0.25 
B)  0.50 
C)  0.75 
D)  0.80 
E)  1.25

Question 19

The slope of the aggregate expenditures function (AE) is flatter than the C+I+G function because:

Accepted Answer

A)  the marginal propensity to consume is ususally less than 1. 
B)  the marginal propensity to import is greater than 1. 
C)  the slope of the net exports function is negative. 
D)  investment(I) and government spending(G) are assumed to be autonomous. 
E)  there is a leakage from the aggregate expenditures function in the form of savings. 
A)  the marginal propensity to consume is ususally less than 1. 
B)  the marginal propensity to import is greater than 1. 
C)  the slope of the net exports function is negative. 
D)  investment(I) and government spending(G) are assumed to be autonomous. 
E)  there is a leakage from the aggregate expenditures function in the form of savings.

Question 20

Which of the following will cause the net export function to shift?

Accepted Answer

A)  A change in real GDP 
B)  An increase in government spending 
C)  An increase in investment spending 
D)  A change in the exchange rate 
E)  A change in the domestic interest rate 
A)  A change in real GDP 
B)  An increase in government spending 
C)  An increase in investment spending 
D)  A change in the exchange rate 
E)  A change in the domestic interest rate

If disposable income rises from $15,000 to $20,000 and the marginal propensity to consume equals 0.9, then saving must increase by $500.

The amount of autonomous consumption in an economy is measured by the:

Other things equal, when the U.S. dollar depreciates, domestic exports rise at every level of domestic income.

When capacity utilization rate is high:

The United States introduced investment tax credit in 1962 and has continued to offer it till date. This has reduced the volatility of investments in the country.

A change in the marginal propensity to save can be graphically represented by:

When the U.S. government removes investment tax credits:

The figure given below represents the consumption function of a country. Figure 9.3 -According to Figure 9.3, saving is zero when disposable income is _____.

Suppose total disposable income in Country X rises by $500 billion while total consumption rises by $50 billion. What would be the slope of the consumption function for this nation?

A change in consumption caused by a change in disposable income is shown by:

The figure given below shows the consumption functions of an economy. Figure 9.4 -Refer to the Figure 9.4. If the economy is in equilibrium at A, which of the following is most likely to occur if consumers expect a period of rapid economic expansion?

As a function of real GDP (real GDP being measured on the horizontal axis), autonomous investment is represented by a(n):

The net export function is negatively sloped because exports are inversely related to domestic income.

All of the following would cause exports to decline, except:

As household wealth increases, it will experience a(n):

The slope of the aggregate expenditures function (AE) is flatter than the C+I+G function because:

Which of the following will cause the net export function to shift?

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 disposable income rises from $15,000 to $20,000 and the marginal propensity to consume equals 0.9, then saving must increase by $500.

The amount of autonomous consumption in an economy is measured by the:

Other things equal, when the U.S. dollar depreciates, domestic exports rise at every level of domestic income.

When capacity utilization rate is high:

The United States introduced investment tax credit in 1962 and has continued to offer it till date. This has reduced the volatility of investments in the country.

A change in the marginal propensity to save can be graphically represented by:

When the U.S. government removes investment tax credits:

The figure given below represents the consumption function of a country. Figure 9.3 -According to Figure 9.3, saving is zero when disposable income is _____.

Suppose total disposable income in Country X rises by $500 billion while total consumption rises by $50 billion. What would be the slope of the consumption function for this nation?

A change in consumption caused by a change in disposable income is shown by:

The figure given below shows the consumption functions of an economy. Figure 9.4 -Refer to the Figure 9.4. If the economy is in equilibrium at A, which of the following is most likely to occur if consumers expect a period of rapid economic expansion?

As a function of real GDP (real GDP being measured on the horizontal axis), autonomous investment is represented by a(n):

The net export function is negatively sloped because exports are inversely related to domestic income.

All of the following would cause exports to decline, except:

As household wealth increases, it will experience a(n):

The slope of the aggregate expenditures function (AE) is flatter than the C+I+G function because:

Which of the following will cause the net export function to shift?

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