Question 1

Exhibit 8-3 Consumption  Function   In Exhibit 8-3, what is the households' marginal propensity to consume (MPC)?

Accepted Answer

A) 0.50. 
B) 0.60. 
C) 0.75. 
D) 0.80. 
A) 0.50. 
B) 0.60. 
C) 0.75. 
D) 0.80.

Question 2

Exhibit 8-10 Consumption function   In Exhibit 8-10, consumption and real disposable income are equal at:

Accepted Answer

A) 500. 
B) 100. 
C) 400. 
D) 200. 
E) 600. 
A) 500. 
B) 100. 
C) 400. 
D) 200. 
E) 600.

Question 3

Exhibit 8-5 Consumption function   As shown in Exhibit 8-5, autonomous consumption is:

Accepted Answer

A) 0. 
B) $1 trillion. 
C) $2 trillion. 
D) $3 trillion. 
E) $4 trillion. 
A) 0. 
B) $1 trillion. 
C) $2 trillion. 
D) $3 trillion. 
E) $4 trillion.

Question 4

If your disposable personal income increases from $30,000 to $40,000 and your savings increases from $2,000 to $4,000, your marginal propensity to save (MPS)is:

Accepted Answer

A) 0.2. 
B) 0.4. 
C) 0.5. 
D) 0.8. 
E) 1.0. 
A) 0.2. 
B) 0.4. 
C) 0.5. 
D) 0.8. 
E) 1.0.

Question 5

Explain how changes in wealth, the price level, interest rates, and expectations alter the consumption curve.

Accepted Answer

An increase in wealth increases consumpt

Question 6

If disposable income is $400 billion, consumption spending is $380 billion, and MPC is 0.5, what is the level of saving?

Accepted Answer

A) $20 billion. 
B) $210 billion. 
C) $380 billion. 
D) $590 billion. 
E) $780 billion. 
A) $20 billion. 
B) $210 billion. 
C) $380 billion. 
D) $590 billion. 
E) $780 billion.

Question 7

Michelle Martelle, CEO of Michelle Enterprises, has five projects in hand and is considering which, if any, to undertake. Their expected returns are: project A = 12 percent, project B = 7 percent, project C = 10 percent, project D = 9 percent, and project E = 8 percent. If the interest rate is 8.5 percent, which, if any, investment projects will she accept?

Accepted Answer

A) Only project A. 
B) Projects A and C. 
C) Projects A, C and D. 
D) Projects A, C, D and E. 
E) Projects A, B, C, D and E. 
A) Only project A. 
B) Projects A and C. 
C) Projects A, C and D. 
D) Projects A, C, D and E. 
E) Projects A, B, C, D and E.

Question 8

The vertical intercept of the consumption function is used to determine the break-even level of real disposable income.

Accepted Answer

A) True 
 B)False

Question 9

According to John Maynard Keynes:

Accepted Answer

A) aggregate expenditures (demand)can be forever inadequate to achieve full employment. 
B) aggregate output (supply)can be forever inadequate to achieve full employment. 
C) the economy would automatically adjust to full employment in the long run. 
D) neither aggregate demand nor aggregate supply is a determinant of full-employment real GDP. 
A) aggregate expenditures (demand)can be forever inadequate to achieve full employment. 
B) aggregate output (supply)can be forever inadequate to achieve full employment. 
C) the economy would automatically adjust to full employment in the long run. 
D) neither aggregate demand nor aggregate supply is a determinant of full-employment real GDP.

Question 10

The most appropriate countercyclical policy, or stabilization policy, in times of unemployment, according to classical economists, is for the government to:

Accepted Answer

A) increase the minimum wage. 
B) impose wage and price controls. 
C) stimulate aggregate demand. 
D) cut taxes. 
E) do nothing. 
A) increase the minimum wage. 
B) impose wage and price controls. 
C) stimulate aggregate demand. 
D) cut taxes. 
E) do nothing.

Question 11

Exhibit 8-1 Disposable income and consumption data
  In Exhibit 8-1, when disposable income (Y)is increased from $1,000 to $2,000, the marginal propensity to consume is:

Accepted Answer

A) 0.2. 
B) 0.6. 
C) 0.8. 
D) 1.0. 
E) 1.25. 
A) 0.2. 
B) 0.6. 
C) 0.8. 
D) 1.0. 
E) 1.25.

Question 12

If consumption spending is larger than disposable income,

Accepted Answer

A) saving is positive. 
B) dissaving occurs. 
C) saving is exactly zero. 
D) a depression results. 
E) this cannot occur. 
A) saving is positive. 
B) dissaving occurs. 
C) saving is exactly zero. 
D) a depression results. 
E) this cannot occur.

Question 13

An upward shift in the consumption function, other things being equal, could be caused by households:

Accepted Answer

A) becoming optimistic about the state of the economy. 
B) becoming pessimistic about the state of the economy. 
C) expecting future income and wealth to decline. 
D) None of these. 
A) becoming optimistic about the state of the economy. 
B) becoming pessimistic about the state of the economy. 
C) expecting future income and wealth to decline. 
D) None of these.

Question 14

A movement along the consumption function is caused by a change in:

Accepted Answer

A) the price level. 
B) autonomous consumption. 
C) real disposable income. 
D) the stock of durable goods. 
A) the price level. 
B) autonomous consumption. 
C) real disposable income. 
D) the stock of durable goods.

Question 15

Exhibit 8-14 Consumption function   In Exhibit 8-14, which of the following could cause the shift from C1 to C2?

Accepted Answer

A) Higher interest rates. 
B) An increase in disposable income. 
C) A decrease in disposable income. 
D) Lower tax rates. 
E) Expectations of future economic growth. 
A) Higher interest rates. 
B) An increase in disposable income. 
C) A decrease in disposable income. 
D) Lower tax rates. 
E) Expectations of future economic growth.

Exhibit 8-3 Consumption Function In Exhibit 8-3, what is the households' marginal propensity to consume (MPC)?

Exhibit 8-10 Consumption function In Exhibit 8-10, consumption and real disposable income are equal at:

Exhibit 8-5 Consumption function As shown in Exhibit 8-5, autonomous consumption is:

If your disposable personal income increases from $30,000 to $40,000 and your savings increases from $2,000 to $4,000, your marginal propensity to save (MPS)is:

Explain how changes in wealth, the price level, interest rates, and expectations alter the consumption curve.

If disposable income is $400 billion, consumption spending is $380 billion, and MPC is 0.5, what is the level of saving?

The vertical intercept of the consumption function is used to determine the break-even level of real disposable income.

According to John Maynard Keynes:

The most appropriate countercyclical policy, or stabilization policy, in times of unemployment, according to classical economists, is for the government to:

Exhibit 8-1 Disposable income and consumption data In Exhibit 8-1, when disposable income (Y)is increased from $1,000 to $2,000, the marginal propensity to consume is:

If consumption spending is larger than disposable income,

An upward shift in the consumption function, other things being equal, could be caused by households:

A movement along the consumption function is caused by a change in:

Exhibit 8-14 Consumption function In Exhibit 8-14, which of the following could cause the shift from C₁ to C₂?

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters

Exam 8: The Keynesian Model

Exhibit 8-3 Consumption Function In Exhibit 8-3, what is the households' marginal propensity to consume (MPC)?

Exhibit 8-10 Consumption function In Exhibit 8-10, consumption and real disposable income are equal at:

Exhibit 8-5 Consumption function As shown in Exhibit 8-5, autonomous consumption is:

If your disposable personal income increases from $30,000 to $40,000 and your savings increases from $2,000 to $4,000, your marginal propensity to save (MPS)is:

Explain how changes in wealth, the price level, interest rates, and expectations alter the consumption curve.

If disposable income is $400 billion, consumption spending is $380 billion, and MPC is 0.5, what is the level of saving?

The vertical intercept of the consumption function is used to determine the break-even level of real disposable income.

According to John Maynard Keynes:

The most appropriate countercyclical policy, or stabilization policy, in times of unemployment, according to classical economists, is for the government to:

Exhibit 8-1 Disposable income and consumption data In Exhibit 8-1, when disposable income (Y)is increased from $1,000 to $2,000, the marginal propensity to consume is:

If consumption spending is larger than disposable income,

An upward shift in the consumption function, other things being equal, could be caused by households:

A movement along the consumption function is caused by a change in:

Exhibit 8-14 Consumption function In Exhibit 8-14, which of the following could cause the shift from C1 to C2?

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters

Exhibit 8-14 Consumption function In Exhibit 8-14, which of the following could cause the shift from C₁ to C₂?