Question 1

That part of disposable income not spent on consumption is defined as:

Accepted Answer

A) transitory disposable income. 
B) permanent disposable income. 
C) disposable income. 
D) autonomous consumption. 
E) saving. 
A) transitory disposable income. 
B) permanent disposable income. 
C) disposable income. 
D) autonomous consumption. 
E) saving.

Question 2

Real investment spending for the past 35 years is more volatile than real personal consumption.

Accepted Answer

A) True 
 B)False

Question 3

Exhibit 8-8 Aggregate expenditures function   In Exhibit 8-8, aggregate income will equal consumption plus investment and the economy will be in equilibrium when real disposable income is:

Accepted Answer

A) $2 trillion. 
B) $4 trillion 
C) $6 trillion. 
D) $8 trillion. 
A) $2 trillion. 
B) $4 trillion 
C) $6 trillion. 
D) $8 trillion.

Question 4

For any given consumption function, autonomous consumption is equal to the level of consumption associated with:

Accepted Answer

A) negative disposable income. 
B) positive disposable income. 
C) zero disposable income. 
D) unstable disposable income. 
A) negative disposable income. 
B) positive disposable income. 
C) zero disposable income. 
D) unstable disposable income.

Question 5

A movement along a consumption function is caused by:

Accepted Answer

A) a change in households' real assets. 
B) a change in interest rates. 
C) changes in taxation policy. 
D) expectations of price changes. 
E) changes in households' disposable incomes. 
A) a change in households' real assets. 
B) a change in interest rates. 
C) changes in taxation policy. 
D) expectations of price changes. 
E) changes in households' disposable incomes.

Question 6

The consumption function has a negative slope.

Accepted Answer

A) True 
 B)False

Question 7

Which one of the following will shift the consumption function upward?

Accepted Answer

A) Higher interest rates. 
B) An increase in real assets. 
C) Expectations of future economic growth. 
D) Lower capacity utilization rates. 
E) A tax increase. 
A) Higher interest rates. 
B) An increase in real assets. 
C) Expectations of future economic growth. 
D) Lower capacity utilization rates. 
E) A tax increase.

Question 8

Exhibit 8-6 Aggregate expenditures function   As shown in Exhibit 8-6, the marginal propensity to save (MPS)is:

Accepted Answer

A) 0.33. 
B) 0.50. 
C) 0.67. 
D) 0.75. 
A) 0.33. 
B) 0.50. 
C) 0.67. 
D) 0.75.

Question 9

A decrease in the rate of interest, other things being equal, will cause a:

Accepted Answer

A) rightward shift of the investment demand curve. 
B) movement upward along the investment demand curve. 
C) movement downward along the investment demand curve. 
D) leftward shift of the investment demand curve. 
A) rightward shift of the investment demand curve. 
B) movement upward along the investment demand curve. 
C) movement downward along the investment demand curve. 
D) leftward shift of the investment demand curve.

Question 10

Exhibit 8-11 Consumption function   In Exhibit 8-11, the shift from C to C' could be caused by a(n):

Accepted Answer

A) increase in disposable income. 
B) expectation of inflation. 
C) increase in interest rates. 
D) increase in the level of saving. 
E) decrease in household wealth. 
A) increase in disposable income. 
B) expectation of inflation. 
C) increase in interest rates. 
D) increase in the level of saving. 
E) decrease in household wealth.

Question 11

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 save (MPS)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 12

The change in consumption divided by a change in disposable income is defined as:

Accepted Answer

A) the marginal propensity to consume. 
B) autonomous consumption. 
C) the consumption function. 
D) Keynes' absolute disposable income hypothesis. 
E) transitory consumption. 
A) the marginal propensity to consume. 
B) autonomous consumption. 
C) the consumption function. 
D) Keynes' absolute disposable income hypothesis. 
E) transitory consumption.

Question 13

Which of the following statements is true concerning the consumption function?

Accepted Answer

A) It slopes upward. 
B) Its slope equals the MPC. 
C) It represents the direct (positive)relationship between consumption spending and the level of real disposable income. 
D) If the consumption function lies above the 45-degree line then saving is positive. 
E) All of these. 
A) It slopes upward. 
B) Its slope equals the MPC. 
C) It represents the direct (positive)relationship between consumption spending and the level of real disposable income. 
D) If the consumption function lies above the 45-degree line then saving is positive. 
E) All of these.

Question 14

Exhibit 8-5 Consumption function   As shown in Exhibit 8-5, dissaving occurs:

Accepted Answer

A) at 0 disposable income. 
B) between $0 and $2 trillion disposable income. 
C) at $2 trillion disposable income. 
D) at a disposable income greater than $2 trillion. 
A) at 0 disposable income. 
B) between $0 and $2 trillion disposable income. 
C) at $2 trillion disposable income. 
D) at a disposable income greater than $2 trillion.

Question 15

The school of thought that emphasizes the natural tendency for an economy to move toward equilibrium full employment is known as the:

Accepted Answer

A) Keynesian school. 
B) supply-side school. 
C) rational expectations school. 
D) classical school. 
A) Keynesian school. 
B) supply-side school. 
C) rational expectations school. 
D) classical school.

Question 16

Exhibit 8-4 Disposable income and consumption data
 
Note: All amounts are in billions of dollars per year. As shown in Exhibit 8-4, autonomous consumption is:

Accepted Answer

A) $75 billion. 
B) $100 billion. 
C) $175 billion. 
D) $275 billion. 
A) $75 billion. 
B) $100 billion. 
C) $175 billion. 
D) $275 billion.

Question 17

Autonomous consumption is equal to the level of consumption associated with:

Accepted Answer

A) unstable disposable income. 
B) positive disposable income. 
C) zero disposable income. 
D) negative disposable income. 
A) unstable disposable income. 
B) positive disposable income. 
C) zero disposable income. 
D) negative disposable income.

Question 18

An increase in the wealth of households, other things remaining the same, can result in ____ the consumption function.

Accepted Answer

A) no effect on 
B) an upward shift in 
C) a movement to the left along 
D) a downward shift of 
A) no effect on 
B) an upward shift in 
C) a movement to the left along 
D) a downward shift of

Question 19

Exhibit 8-15 Disposable income and consumption data      
In Exhibit 8-15, the MPC when Y increases from $5,000 to $6,000 is:

Accepted Answer

A) 0.20. 
B) 0.80. 
C) 0.25. 
D) 0.75. 
A) 0.20. 
B) 0.80. 
C) 0.25. 
D) 0.75.

Question 20

The marginal propensity to consume (MPC)is the change in consumption divided by the change in saving.

Accepted Answer

A) True 
 B)False

Exam 8: The Keynesian Model

That part of disposable income not spent on consumption is defined as:

Real investment spending for the past 35 years is more volatile than real personal consumption.

Exhibit 8-8 Aggregate expenditures function In Exhibit 8-8, aggregate income will equal consumption plus investment and the economy will be in equilibrium when real disposable income is:

For any given consumption function, autonomous consumption is equal to the level of consumption associated with:

A movement along a consumption function is caused by:

The consumption function has a negative slope.

Which one of the following will shift the consumption function upward?

Exhibit 8-6 Aggregate expenditures function As shown in Exhibit 8-6, the marginal propensity to save (MPS)is:

A decrease in the rate of interest, other things being equal, will cause a:

Exhibit 8-11 Consumption function In Exhibit 8-11, the shift from C to C' could be caused by a(n):

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 save (MPS)is:

The change in consumption divided by a change in disposable income is defined as:

Which of the following statements is true concerning the consumption function?

Exhibit 8-5 Consumption function As shown in Exhibit 8-5, dissaving occurs:

The school of thought that emphasizes the natural tendency for an economy to move toward equilibrium full employment is known as the:

Exhibit 8-4 Disposable income and consumption data Note: All amounts are in billions of dollars per year. As shown in Exhibit 8-4, autonomous consumption is:

Autonomous consumption is equal to the level of consumption associated with:

An increase in the wealth of households, other things remaining the same, can result in ____ the consumption function.

Exhibit 8-15 Disposable income and consumption data In Exhibit 8-15, the MPC when Y increases from $5,000 to $6,000 is:

The marginal propensity to consume (MPC)is the change in consumption divided by the change in saving.

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