Question 1

As shown in Exhibit 8-2, dissaving occurs:

Accepted Answer

A) at $5 trillion. 
B) between 0 and $4 trillion. 
C) where disposable income is greater than $4 trillion. 
D) at $8 trillion. 
A) at $5 trillion. 
B) between 0 and $4 trillion. 
C) where disposable income is greater than $4 trillion. 
D) at $8 trillion.

Question 2

As shown in Exhibit 8-3, saving occurs:

Accepted Answer

A) at 0. 
B) between 0 and $5 trillion. 
C) where real disposable income is greater than $5 trillion. 
D) at $5 trillion. 
A) at 0. 
B) between 0 and $5 trillion. 
C) where real disposable income is greater than $5 trillion. 
D) at $5 trillion.

Question 3

The marginal propensity to save plus the marginal propensity to consume always equals 1.

Accepted Answer

A) True 
 B)False

Question 4

According to Keynes, what is the most important determinant of households' spending on goods and services?

Accepted Answer

A) The price level. 
B) The interest rate. 
C) Autonomous consumption. 
D) Disposable income. 
A) The price level. 
B) The interest rate. 
C) Autonomous consumption. 
D) Disposable income.

Question 5

The vertical intercept of the consumption function that represents the portion of consumption expenditure not associated with a level of disposable income is known as:

Accepted Answer

A) zero income intercept. 
B) disposable income intercept. 
C) autonomous consumption. 
D) automatic consumption line. 
A) zero income intercept. 
B) disposable income intercept. 
C) autonomous consumption. 
D) automatic consumption line.

Question 6

Exhibit 8-4 Disposable income and consumption data      
Note: All amounts are in billions of dollars per year. As shown in Exhibit 8-4, if disposable income is $100 billion, the marginal propensity to consume (MPC)is:

Accepted Answer

A) 0.00. 
B) 0.25. 
C) 0.75. 
D) 1.00. 
A) 0.00. 
B) 0.25. 
C) 0.75. 
D) 1.00.

Question 7

The nation has its own MPC. When disposable income increases from $300 billion to $400 billion, national consumption increases from $300 billion to $360 billion. At Y = $400 billion, the MPC is:

Accepted Answer

A) 0.2. 
B) 0.5. 
C) 0.6. 
D) 0.67. 
E) 1.33. 
A) 0.2. 
B) 0.5. 
C) 0.6. 
D) 0.67. 
E) 1.33.

Question 8

Exhibit 8-4 Disposable income and consumption data
     
Note: All amounts are in billions of dollars per year. As shown in Exhibit 8-4, if disposable income is $400 billion, the marginal propensity to consume (MPC)is:

Accepted Answer

A) 0.00. 
B) 0.25. 
C) 0.75. 
D) 1.00. 
A) 0.00. 
B) 0.25. 
C) 0.75. 
D) 1.00.

Question 9

Exhibit 8-10 Consumption function   In Exhibit 8-10, when disposable income is equal to zero, saving is equal to:

Accepted Answer

A) $0. 
B) $100. 
C) - $50. 
D) - $100. 
E) $50. 
A) $0. 
B) $100. 
C) - $50. 
D) - $100. 
E) $50.

Question 10

If the economy were left on its own without the interference of government or the Fed, it would move toward an equilibrium rate of growth that would produce, with only minor interruptions, full employment without inflation. What school supports this view?

Accepted Answer

A) Classical. 
B) Keynesian. 
C) Monetarism. 
D) Supply-side. 
E) Neo-Keynesian. 
A) Classical. 
B) Keynesian. 
C) Monetarism. 
D) Supply-side. 
E) Neo-Keynesian.

Question 11

Exhibit 8-10 Consumption function   In Exhibit 8-10, the value of the marginal propensity to consume is:

Accepted Answer

A) .75. 
B) .80. 
C) .50. 
D) .25. 
E) .20. 
A) .75. 
B) .80. 
C) .50. 
D) .25. 
E) .20.

Question 12

Exhibit 8-9 Aggregate expenditures function   In Exhibit 8-9, what is the households' marginal propensity to consume (MPC)?

Accepted Answer

A) 0.5. 
B) 0.67. 
C) 0.75. 
D) 0.80. 
A) 0.5. 
B) 0.67. 
C) 0.75. 
D) 0.80.

Question 13

Exhibit 8-2 Consumption function   As shown in Exhibit 8-2, the marginal propensity to save (MPS)is:

Accepted Answer

A) 0.25. 
B) 0.50. 
C) 0.75. 
D) 0.90. 
A) 0.25. 
B) 0.50. 
C) 0.75. 
D) 0.90.

Question 14

In the Keynesian aggregate expenditure model, the 45-degree line indicates:

Accepted Answer

A) amounts households plan to spend at each possible level of income. 
B) amounts households plan to save at each possible level of income. 
C) all income levels at which the planned spending of decision makers equals total output. 
D) all income levels at which the marginal propensity to consume is one. 
A) amounts households plan to spend at each possible level of income. 
B) amounts households plan to save at each possible level of income. 
C) all income levels at which the planned spending of decision makers equals total output. 
D) all income levels at which the marginal propensity to consume is one.

Question 15

If, for a given disposable income level, the disposable income line lies below the consumption curve, saving:

Accepted Answer

A) equals consumption. 
B) equals disposable income. 
C) is less than zero. 
D) is equal to zero. 
E) is greater than zero. 
A) equals consumption. 
B) equals disposable income. 
C) is less than zero. 
D) is equal to zero. 
E) is greater than zero.

Question 16

If your disposable income increases from $30,000 to $35,000 and your consumption increases from $11,000 to $12,000, your marginal propensity to consume (MPC)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 17

The investment demand curve shows the amount businesses spend for investment goods at different possible:

Accepted Answer

A) price levels. 
B) levels of GDP. 
C) rates of interest. 
D) levels of taxation. 
A) price levels. 
B) levels of GDP. 
C) rates of interest. 
D) levels of taxation.

Question 18

If people become pessimistic about the state of the economy, the consumption function shifts upward.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 8-13 Investment expenditures   In Exhibit 8-13, which of the following could cause the shift from I1 to I2?

Accepted Answer

A) Lower money holdings. 
B) Lower interest rates. 
C) Expectations of a future economic slow-down. 
D) Lower disposable income. 
E) Lower capacity utilization. 
A) Lower money holdings. 
B) Lower interest rates. 
C) Expectations of a future economic slow-down. 
D) Lower disposable income. 
E) Lower capacity utilization.

Question 20

Exhibit 8-5 Consumption function   As shown in Exhibit 8-5, the marginal propensity to consume (MPC)is:

Accepted Answer

A) 0.25. 
B) 0.50. 
C) 0.75. 
D) 0.90. 
A) 0.25. 
B) 0.50. 
C) 0.75. 
D) 0.90.

Exam 8: The Keynesian Model

As shown in Exhibit 8-2, dissaving occurs:

As shown in Exhibit 8-3, saving occurs:

The marginal propensity to save plus the marginal propensity to consume always equals 1.

According to Keynes, what is the most important determinant of households' spending on goods and services?

The vertical intercept of the consumption function that represents the portion of consumption expenditure not associated with a level of disposable income is known as:

Exhibit 8-4 Disposable income and consumption data Note: All amounts are in billions of dollars per year. As shown in Exhibit 8-4, if disposable income is $100 billion, the marginal propensity to consume (MPC)is:

The nation has its own MPC. When disposable income increases from $300 billion to $400 billion, national consumption increases from $300 billion to $360 billion. At Y = $400 billion, the MPC is:

Exhibit 8-4 Disposable income and consumption data Note: All amounts are in billions of dollars per year. As shown in Exhibit 8-4, if disposable income is $400 billion, the marginal propensity to consume (MPC)is:

Exhibit 8-10 Consumption function In Exhibit 8-10, when disposable income is equal to zero, saving is equal to:

If the economy were left on its own without the interference of government or the Fed, it would move toward an equilibrium rate of growth that would produce, with only minor interruptions, full employment without inflation. What school supports this view?

Exhibit 8-10 Consumption function In Exhibit 8-10, the value of the marginal propensity to consume is:

Exhibit 8-9 Aggregate expenditures function In Exhibit 8-9, what is the households' marginal propensity to consume (MPC)?

Exhibit 8-2 Consumption function As shown in Exhibit 8-2, the marginal propensity to save (MPS)is:

In the Keynesian aggregate expenditure model, the 45-degree line indicates:

If, for a given disposable income level, the disposable income line lies below the consumption curve, saving:

If your disposable income increases from $30,000 to $35,000 and your consumption increases from $11,000 to $12,000, your marginal propensity to consume (MPC)is:

The investment demand curve shows the amount businesses spend for investment goods at different possible:

If people become pessimistic about the state of the economy, the consumption function shifts upward.

Exhibit 8-13 Investment expenditures In Exhibit 8-13, which of the following could cause the shift from I1 to I2?

Exhibit 8-5 Consumption function As shown in Exhibit 8-5, the marginal propensity to consume (MPC)is:

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 8-13 Investment expenditures In Exhibit 8-13, which of the following could cause the shift from I₁to I₂?