Question 1

When disposable income is zero, consumption is also zero.

Accepted Answer

A) True 
 B)False

Question 2

Keynesian economics developed in response to:

Accepted Answer

A)  the Great Depression of the 1930s. 
B)  the inflation following World War II. 
C)  economic growth during the 1950s. 
D)  the Vietnam War. 
E)  the oil embargo in the 1970s. 
A)  the Great Depression of the 1930s. 
B)  the inflation following World War II. 
C)  economic growth during the 1950s. 
D)  the Vietnam War. 
E)  the oil embargo in the 1970s.

Question 3

Which of the following is least likely to contribute to the volatility of investment spending?

Accepted Answer

A)  Expectations about business conditions 
B)  Changes in government spending 
C)  Changes in tax laws 
D)  Changes in capacity utilization 
E)  Interest rate fluctuations 
A)  Expectations about business conditions 
B)  Changes in government spending 
C)  Changes in tax laws 
D)  Changes in capacity utilization 
E)  Interest rate fluctuations

Question 4

Which of the following will cause the investment function to shift upward?

Accepted Answer

A)  An decrease in government subsidies to businesses 
B)  An increase in business profits 
C)  A decline in capacity utilization 
D)  Expectations of higher business taxes 
E)  An increase in the market rate of interest 
A)  An decrease in government subsidies to businesses 
B)  An increase in business profits 
C)  A decline in capacity utilization 
D)  Expectations of higher business taxes 
E)  An increase in the market rate of interest

Question 5

The figure given below represents the saving function of an economy.
Figure 9.1
  
-Refer to Figure 9.1. An increase in autonomous consumption would be illustrated by:

Accepted Answer

A)  an upward shift of the saving function. 
B)  a downward shift of the saving function. 
C)  a downward shift of the corresponding consumption function. 
D)  a movement to the right along the saving function. 
E)  a movement to the left along the saving function. 
A)  an upward shift of the saving function. 
B)  a downward shift of the saving function. 
C)  a downward shift of the corresponding consumption function. 
D)  a movement to the right along the saving function. 
E)  a movement to the left along the saving function.

Question 6

_____ is the primary determinant of consumption and is usually measured in terms of current disposable income.

Accepted Answer

A)  Household income 
B)  Wealth 
C)  Expectation 
D)  Interest rate 
E)  Tax liability 
A)  Household income 
B)  Wealth 
C)  Expectation 
D)  Interest rate 
E)  Tax liability

Question 7

Which of the following variables do not change autonomous consumption?

Accepted Answer

A)  Demographics 
B)  Taxation 
C)  Expectation 
D)  Wealth 
E)  Disposable income 
A)  Demographics 
B)  Taxation 
C)  Expectation 
D)  Wealth 
E)  Disposable income

Question 8

The figure given below represents the consumption function of a country.
Figure 9.3
  
-According to Figure 9.3, autonomous consumption equals:

Accepted Answer

A)  -$200. 
B)  $0. 
C)  $100. 
D)  $200. 
E)  $400. 
A)  -$200. 
B)  $0. 
C)  $100. 
D)  $200. 
E)  $400.

Question 9

The consumer confidence index can be defined as:

Accepted Answer

A)  an economic index that measures how consumers feel about their government. 
B)  an economic index that measures how confident companies are about keeping their current consumers. 
C)  an economic index that measures household expectations about the economy. 
D)  an index that measures how investors feel about their investments in the stock market. 
E)  an economic index used to measure consumers' confidence on a particular brand. 
A)  an economic index that measures how consumers feel about their government. 
B)  an economic index that measures how confident companies are about keeping their current consumers. 
C)  an economic index that measures household expectations about the economy. 
D)  an index that measures how investors feel about their investments in the stock market. 
E)  an economic index used to measure consumers' confidence on a particular brand.

Question 10

At the point where consumption equals disposable income, the average propensity to consume equals 1.

Accepted Answer

A) True 
 B)False

Question 11

Other things equal, when Europeans want to buy more grain from the United States:

Accepted Answer

A)  U.S. imports will increase. 
B)  European exports will increase at every level of domestic income. 
C)  U.S. exports will increase at every level of domestic income. 
D)  the U.S. balance of payments will show a deficit. 
E)  U.S. consumption spending will fall. 
A)  U.S. imports will increase. 
B)  European exports will increase at every level of domestic income. 
C)  U.S. exports will increase at every level of domestic income. 
D)  the U.S. balance of payments will show a deficit. 
E)  U.S. consumption spending will fall.

Question 12

Which of the following statements is true?

Accepted Answer

A)  Real GDP is a positive function of net exports. 
B)  In the 1980s, the United States experienced a large trade surplus with Japan. 
C)  Positive net exports mean that the domestic country imports more than it exports. 
D)  Total U.S. net exports with Western Europe are zero. 
E)  U.S. net exports are negative because of large trade deficits with other industrial nations. 
A)  Real GDP is a positive function of net exports. 
B)  In the 1980s, the United States experienced a large trade surplus with Japan. 
C)  Positive net exports mean that the domestic country imports more than it exports. 
D)  Total U.S. net exports with Western Europe are zero. 
E)  U.S. net exports are negative because of large trade deficits with other industrial nations.

Question 13

In the country of Marzipana, total consumption in Year 1 was $56,000 million and in Year 2 was 60,000 million. It has been observed that each time disposable income changes in this country by $100, consumption changes by $70. Using this information compute the change in disposable income from Year 1 to Year 2.

Accepted Answer

A)  Disposable income increased by $2,800 million in Year 2. 
B)  Disposable income decreased by $2,000 million in Year 2. 
C)  Disposable income increased by $2,000 million in Year 2. 
D)  Disposable income increased by $4,500 million in Year 2. 
E)  Disposable income decreased by $2,600 million in Year 2. 
A)  Disposable income increased by $2,800 million in Year 2. 
B)  Disposable income decreased by $2,000 million in Year 2. 
C)  Disposable income increased by $2,000 million in Year 2. 
D)  Disposable income increased by $4,500 million in Year 2. 
E)  Disposable income decreased by $2,600 million in Year 2.

Question 14

Dissaving occurs when the consumption function lies below the 45-degree line.

Accepted Answer

A) True 
 B)False

Question 15

The figure given below shows the consumption function of a household.
Figure 9.2
  
-In Figure 9.2, the line segment AD represents:

Accepted Answer

A)  autonomous consumption. 
B)  the maximum amount of saving. 
C)  negative consumption. 
D)  zero consumption. 
E)  autonomous income. 
A)  autonomous consumption. 
B)  the maximum amount of saving. 
C)  negative consumption. 
D)  zero consumption. 
E)  autonomous income.

Question 16

Once macroeconomic equilibrium has been established in an economy, there is no tendency for real GDP to change, even if there is a change in autonomous expenditure.

Accepted Answer

A) True 
 B)False

Question 17

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. At an income level of $10,000, the APS equals -0.20. Therefore, the APC has to equal:

Accepted Answer

A)  0.20. 
B)  0.80. 
C)  -1.20. 
D)  1.20. 
E)  1.80. 
A)  0.20. 
B)  0.80. 
C)  -1.20. 
D)  1.20. 
E)  1.80.

Question 18

As disposable income increases, consumption spending will rise, but it will rise by less than disposable income if the MPS is positive.

Accepted Answer

A) True 
 B)False

Question 19

The figure given below represents the consumption function of a country.
Figure 9.3
  
-Refer to Figure 9.3. We can infer that the marginal propensity to save would be _____.

Accepted Answer

A)  0.7 
B)  0.1 
C)  0.4 
D)  0.25 
E)  0.5 
A)  0.7 
B)  0.1 
C)  0.4 
D)  0.25 
E)  0.5

Question 20

The figure given below shows the consumption function of a household.
Figure 9.2
  
-In Figure 9.2, an increase in autonomous consumption would be illustrated by:

Accepted Answer

A)  moving from point A to point D. 
B)  moving from point A to point B. 
C)  shifting the whole consumption function upward. 
D)  shifting the whole consumption function downward. 
E)  moving from point C to point B. 
A)  moving from point A to point D. 
B)  moving from point A to point B. 
C)  shifting the whole consumption function upward. 
D)  shifting the whole consumption function downward. 
E)  moving from point C to point B.

When disposable income is zero, consumption is also zero.

Keynesian economics developed in response to:

Which of the following is least likely to contribute to the volatility of investment spending?

Which of the following will cause the investment function to shift upward?

The figure given below represents the saving function of an economy. Figure 9.1 -Refer to Figure 9.1. An increase in autonomous consumption would be illustrated by:

_____ is the primary determinant of consumption and is usually measured in terms of current disposable income.

Which of the following variables do not change autonomous consumption?

The figure given below represents the consumption function of a country. Figure 9.3 -According to Figure 9.3, autonomous consumption equals:

The consumer confidence index can be defined as:

At the point where consumption equals disposable income, the average propensity to consume equals 1.

Other things equal, when Europeans want to buy more grain from the United States:

Which of the following statements is true?

Dissaving occurs when the consumption function lies below the 45-degree line.

The figure given below shows the consumption function of a household. Figure 9.2 -In Figure 9.2, the line segment AD represents:

Once macroeconomic equilibrium has been established in an economy, there is no tendency for real GDP to change, even if there is a change in autonomous expenditure.

As disposable income increases, consumption spending will rise, but it will rise by less than disposable income if the MPS is positive.

The figure given below represents the consumption function of a country. Figure 9.3 -Refer to Figure 9.3. We can infer that the marginal propensity to save would be _____.

The figure given below shows the consumption function of a household. Figure 9.2 -In Figure 9.2, an increase in autonomous consumption would be illustrated by:

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

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Exam 9: Aggregate Expenditures

When disposable income is zero, consumption is also zero.

Keynesian economics developed in response to:

Which of the following is least likely to contribute to the volatility of investment spending?

Which of the following will cause the investment function to shift upward?

The figure given below represents the saving function of an economy. Figure 9.1 -Refer to Figure 9.1. An increase in autonomous consumption would be illustrated by:

_____ is the primary determinant of consumption and is usually measured in terms of current disposable income.

Which of the following variables do not change autonomous consumption?

The figure given below represents the consumption function of a country. Figure 9.3 -According to Figure 9.3, autonomous consumption equals:

The consumer confidence index can be defined as:

At the point where consumption equals disposable income, the average propensity to consume equals 1.

Other things equal, when Europeans want to buy more grain from the United States:

Which of the following statements is true?

Dissaving occurs when the consumption function lies below the 45-degree line.

The figure given below shows the consumption function of a household. Figure 9.2 -In Figure 9.2, the line segment AD represents:

Once macroeconomic equilibrium has been established in an economy, there is no tendency for real GDP to change, even if there is a change in autonomous expenditure.

As disposable income increases, consumption spending will rise, but it will rise by less than disposable income if the MPS is positive.

The figure given below represents the consumption function of a country. Figure 9.3 -Refer to Figure 9.3. We can infer that the marginal propensity to save would be _____.

The figure given below shows the consumption function of a household. Figure 9.2 -In Figure 9.2, an increase in autonomous consumption would be illustrated by:

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