Question 1

The tax cut of 2009 had little significant effect on consumer spending because it

Accepted Answer

A)  was not large enough. 
B)  was perceived as temporary. 
C)  came too early in the year. 
D)  was subtracted from 2008 taxes due. 
A)  was not large enough. 
B)  was perceived as temporary. 
C)  came too early in the year. 
D)  was subtracted from 2008 taxes due.

Question 2

In the circular flow model, which of the following is an injection?

Accepted Answer

A)  Investment spending 
B)  Government taxes 
C)  Total exports 
D)  Imports 
A)  Investment spending 
B)  Government taxes 
C)  Total exports 
D)  Imports

Question 3

Which of the following will most likely cause a shift in the consumption function?

Accepted Answer

A)  A change in consumer confidence 
B)  A change in national output 
C)  A change in real GDP 
D)  A change in disposable income 
A)  A change in consumer confidence 
B)  A change in national output 
C)  A change in real GDP 
D)  A change in disposable income

Question 4

Lower real interest rates

Accepted Answer

A)  tend to shift the consumption function upward. 
B)  have no significant effect on consumption. 
C)  tend to shift the consumption function downward. 
D)  tend to move the consumer upward along the consumption function. 
A)  tend to shift the consumption function upward. 
B)  have no significant effect on consumption. 
C)  tend to shift the consumption function downward. 
D)  tend to move the consumer upward along the consumption function.

Question 5

Suppose your expectations of long-run income decreases, this will most likely

Accepted Answer

A)  decrease your consumption function. 
B)  increase your consumption function. 
C)  increase your short-run debt. 
D)  decrease your short-run debt. 
A)  decrease your consumption function. 
B)  increase your consumption function. 
C)  increase your short-run debt. 
D)  decrease your short-run debt.

Question 6

Do economists know the value of the MPC for most economies?

Accepted Answer

A)  Yes, with a high level of precision. 
B)  Yes, with a certainty level of four decimal places. 
C)  No, it is impossible to determine a national MPC. 
D)  Yes, but with some level of uncertainty. 
A)  Yes, with a high level of precision. 
B)  Yes, with a certainty level of four decimal places. 
C)  No, it is impossible to determine a national MPC. 
D)  Yes, but with some level of uncertainty.

Question 7

Based on the relative size of factor payments, the most important resource in the U.S. economy is

Accepted Answer

A)  capital. 
B)  land. 
C)  labor. 
D)  natural resources. 
A)  capital. 
B)  land. 
C)  labor. 
D)  natural resources.

Question 8

National income and domestic product must be equal.

Accepted Answer

A) True 
 B)False

Question 9

To economists, investment means buying stocks and bonds.

Accepted Answer

A) True 
 B)False

Question 10

Melissa purchases shares in a government bond mutual fund. Is this included in the aggregate demand component "Investment"?

Accepted Answer

A)  Yes, if it is a domestic mutual fund. 
B)  Yes, if the purchase is made out of current income. 
C)  No, unless the funds are deposited in a domestic financial institution. 
D)  No, it would never be included. 
A)  Yes, if it is a domestic mutual fund. 
B)  Yes, if the purchase is made out of current income. 
C)  No, unless the funds are deposited in a domestic financial institution. 
D)  No, it would never be included.

Question 11

Which of the following would be added to U.S. national income?

Accepted Answer

A)  An American consumer buying French wine 
B)  An American business selling aircraft to British Airways 
C)  A Swedish firm selling mobile phones to Americans 
D)  A French firm buying a Swedish cellular phone 
A)  An American consumer buying French wine 
B)  An American business selling aircraft to British Airways 
C)  A Swedish firm selling mobile phones to Americans 
D)  A French firm buying a Swedish cellular phone

Question 12

The most volatile component of aggregate demand is

Accepted Answer

A)  consumer spending. 
B)  government purchases. 
C)  net exports. 
D)  investment spending. 
A)  consumer spending. 
B)  government purchases. 
C)  net exports. 
D)  investment spending.

Question 13

Why is investment spending a highly volatile component?

Accepted Answer

Several factors influence how much busin

Question 14

Inventories are

Accepted Answer

A)  goods that have not been purchased but have been produced during the current year. 
B)  consumer expenditures. 
C)  part of the debt surplus. 
D)  part of next exports. 
A)  goods that have not been purchased but have been produced during the current year. 
B)  consumer expenditures. 
C)  part of the debt surplus. 
D)  part of next exports.

Question 15

The marginal propensity to consume is calculated by dividing the change in consumer spending by the change in disposable income.

Accepted Answer

A) True 
 B)False

Question 16

Retirement savings allows retirees to consume more of their disposable income because

Accepted Answer

A)  they have a better work ethic than the young. 
B)  they have better credit histories than the young. 
C)  they can withdraw from their retirement savings accounts. 
D)  they do not have debt. 
A)  they have a better work ethic than the young. 
B)  they have better credit histories than the young. 
C)  they can withdraw from their retirement savings accounts. 
D)  they do not have debt.

Question 17

Which of the following would be counted as investment in the national income accounts?

Accepted Answer

A)  The purchase of a newly issued stock 
B)  The purchase of a newly built apartment house 
C)  The purchase of a newly minted coin 
D)  The payment of tuition at a private college 
A)  The purchase of a newly issued stock 
B)  The purchase of a newly built apartment house 
C)  The purchase of a newly minted coin 
D)  The payment of tuition at a private college

Question 18

Which of the following would cause an upward shift in the consumption function?

Accepted Answer

A)  A stock market crash 
B)  An increase in the price level 
C)  A decrease in disposable income 
D)  A decrease in the price level 
A)  A stock market crash 
B)  An increase in the price level 
C)  A decrease in disposable income 
D)  A decrease in the price level

Question 19

Economists expect the relationship between consumption and disposable income to be

Accepted Answer

A)  unpredictable. 
B)  transitory. 
C)  fixed. 
D)  inverse 
E)  stable. 
A)  unpredictable. 
B)  transitory. 
C)  fixed. 
D)  inverse 
E)  stable.

Question 20

Government transfer payments are income earned by individuals who work for the federal government.

Accepted Answer

A) True 
 B)False

Exam 24: Aggregate Demand and the Powerful Consumer

The tax cut of 2009 had little significant effect on consumer spending because it

In the circular flow model, which of the following is an injection?

Which of the following will most likely cause a shift in the consumption function?

Lower real interest rates

Suppose your expectations of long-run income decreases, this will most likely

Do economists know the value of the MPC for most economies?

Based on the relative size of factor payments, the most important resource in the U.S. economy is

National income and domestic product must be equal.

To economists, investment means buying stocks and bonds.

Melissa purchases shares in a government bond mutual fund. Is this included in the aggregate demand component "Investment"?

Which of the following would be added to U.S. national income?

The most volatile component of aggregate demand is

Why is investment spending a highly volatile component?

Inventories are

The marginal propensity to consume is calculated by dividing the change in consumer spending by the change in disposable income.

Retirement savings allows retirees to consume more of their disposable income because

Which of the following would be counted as investment in the national income accounts?

Which of the following would cause an upward shift in the consumption function?

Economists expect the relationship between consumption and disposable income to be

Government transfer payments are income earned by individuals who work for the federal government.

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Contemporary Issues in the Us Economy

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