Question 1

If disposable income rises by $100 billion, we can expect that consumers will

Accepted Answer

A)  increase their saving by $100 billion. 
B)  increase their spending by $100 billion. 
C)  increase their spending by more than $100 billion. 
D)  increase their spending by less than $100 billion. 
A)  increase their saving by $100 billion. 
B)  increase their spending by $100 billion. 
C)  increase their spending by more than $100 billion. 
D)  increase their spending by less than $100 billion.

Question 2

If the price level increases, we would expect consumers to

Accepted Answer

A)  raise their consumption functions. 
B)  move downward along their consumption functions. 
C)  lower their consumption functions. 
D)  move upward along their consumption functions. 
A)  raise their consumption functions. 
B)  move downward along their consumption functions. 
C)  lower their consumption functions. 
D)  move upward along their consumption functions.

Question 3

When GDP is calculated as the final demand for goods and services by consumers, businesses, governments, and foreigners, then GDP is measured by

Accepted Answer

A)  the sum of all value added. 
B)  the sum of all productive resource inputs. 
C)  the sum of all factor payments. 
D)  the sum of final goods and services. 
A)  the sum of all value added. 
B)  the sum of all productive resource inputs. 
C)  the sum of all factor payments. 
D)  the sum of final goods and services.

Question 4

A scatter diagram could help a policy maker decide on the size of a tax cut necessary to increase consumer expenditures by a certain amount.

Accepted Answer

A) True 
 B)False

Question 5

Employee compensation accounts for about what percentage of national income?

Accepted Answer

A)  33 percent 
B)  42 percent 
C)  66 percent 
D)  90 percent 
A)  33 percent 
B)  42 percent 
C)  66 percent 
D)  90 percent

Question 6

When aggregate demand decreases rapidly, the economy is likely to experience

Accepted Answer

A)  inflation. 
B)  an economic boom. 
C)  economic growth. 
D)  recession. 
A)  inflation. 
B)  an economic boom. 
C)  economic growth. 
D)  recession.

Question 7

Figure 8-1
 
 
Given the scatter diagram in Figure 8-1, if real disposable income is $600 billion and asset wealth increases by $100 billion, how much will consumers spend?

Accepted Answer

A)  $550 billion 
B)  $450 billion 
C)  $600 billion 
D)  Cannot be determined 
A)  $550 billion 
B)  $450 billion 
C)  $600 billion 
D)  Cannot be determined

Question 8

When computing gross domestic product, government services are valued at the

Accepted Answer

A)  price consumers pay for them. 
B)  value of the resources used to produce them. 
C)  value of comparable outputs from the private sector. 
D)  value of taxes collected from consumers. 
A)  price consumers pay for them. 
B)  value of the resources used to produce them. 
C)  value of comparable outputs from the private sector. 
D)  value of taxes collected from consumers.

Question 9

If U.S. consumers become more optimistic about their future income and wealth, the consumption function will shift upward.

Accepted Answer

A) True 
 B)False

Question 10

The net exports adjustments in aggregate demand includes

Accepted Answer

A)  capital inflows minus capital outflows. 
B)  capital outflows minus capital inflows. 
C)  the sum of exports minus imports. 
D)  the sum of imports minus exports. 
A)  capital inflows minus capital outflows. 
B)  capital outflows minus capital inflows. 
C)  the sum of exports minus imports. 
D)  the sum of imports minus exports.

Question 11

Aggregate demand is the total demand for

Accepted Answer

A)  all intermediate and final goods. 
B)  all monetary investments. 
C)  real and financial investments. 
D)  all final goods and services. 
A)  all intermediate and final goods. 
B)  all monetary investments. 
C)  real and financial investments. 
D)  all final goods and services.

Question 12

Which of the following is not part of the investment component of GDP?

Accepted Answer

A)  Residential construction 
B)  Plant, equipment, and software 
C)  Net imports 
D)  Business structures 
A)  Residential construction 
B)  Plant, equipment, and software 
C)  Net imports 
D)  Business structures

Question 13

National income is the sum of

Accepted Answer

A)  wages and profits. 
B)  wages, interest, profits, and rent. 
C)  interest and rent. 
D)  wages, transfer payments, and tax revenues. 
A)  wages and profits. 
B)  wages, interest, profits, and rent. 
C)  interest and rent. 
D)  wages, transfer payments, and tax revenues.

Question 14

In the national income accounts, the symbol G represents the

Accepted Answer

A)  government production of goods and services. 
B)  volume of goods and services purchased by the federal government. 
C)  value of goods and services purchased by the federal government. 
D)  value of goods and services purchased by all levels of government. 
A)  government production of goods and services. 
B)  volume of goods and services purchased by the federal government. 
C)  value of goods and services purchased by the federal government. 
D)  value of goods and services purchased by all levels of government.

Question 15

In calculating the nation's total output, net exports do not

Accepted Answer

A)  represent exports of goods and services minus imports of goods and services. 
B)  have been a negative number in the last several years. 
C)  would include purchases of U.S.-made automobiles by foreigners minus purchase of foreign-made automobiles by U.S. residents. 
D)  have been positive since global trade as expanded. 
A)  represent exports of goods and services minus imports of goods and services. 
B)  have been a negative number in the last several years. 
C)  would include purchases of U.S.-made automobiles by foreigners minus purchase of foreign-made automobiles by U.S. residents. 
D)  have been positive since global trade as expanded.

Question 16

Table 8-1   According to the data in Table 8-1, the value of GDP is

Accepted Answer

A)  800 
B)  805 
C)  955 
D)  1,055 
A)  800 
B)  805 
C)  955 
D)  1,055

Question 17

National income can be calculated by subtracting

Accepted Answer

A)  depreciation from GDP. 
B)  indirect business taxes from GDP. 
C)  depreciation and indirect business taxes from GDP. 
D)  transfer payments and taxes from GDP. 
A)  depreciation from GDP. 
B)  indirect business taxes from GDP. 
C)  depreciation and indirect business taxes from GDP. 
D)  transfer payments and taxes from GDP.

Question 18

Every Christmas, you buy yourself a lottery ticket. This year, you win the $500 million Powerball. This would most likely cause your consumption function to

Accepted Answer

A)  shift downward temporarily. 
B)  shift upward permanently. 
C)  shift downward permanently. 
D)  shift upward temporarily. 
A)  shift downward temporarily. 
B)  shift upward permanently. 
C)  shift downward permanently. 
D)  shift upward temporarily.

Question 19

When the price level falls, consumers may feel wealthier and the consumption function will shift upward.

Accepted Answer

A) True 
 B)False

Question 20

Suppose the federal government wants to encourage businesses to increase investment spending. Which policy may be the most effective?

Accepted Answer

A)  An increase in corporate income taxes 
B)  An increase in real interest rates 
C)  An increase in warnings of a coming recession 
D)  An increase in tax deductions for investment spending 
A)  An increase in corporate income taxes 
B)  An increase in real interest rates 
C)  An increase in warnings of a coming recession 
D)  An increase in tax deductions for investment spending

Exam 24: Aggregate Demand and the Powerful Consumer

If disposable income rises by $100 billion, we can expect that consumers will

If the price level increases, we would expect consumers to

When GDP is calculated as the final demand for goods and services by consumers, businesses, governments, and foreigners, then GDP is measured by

A scatter diagram could help a policy maker decide on the size of a tax cut necessary to increase consumer expenditures by a certain amount.

Employee compensation accounts for about what percentage of national income?

When aggregate demand decreases rapidly, the economy is likely to experience

Figure 8-1 Given the scatter diagram in Figure 8-1, if real disposable income is $600 billion and asset wealth increases by $100 billion, how much will consumers spend?

When computing gross domestic product, government services are valued at the

If U.S. consumers become more optimistic about their future income and wealth, the consumption function will shift upward.

The net exports adjustments in aggregate demand includes

Aggregate demand is the total demand for

Which of the following is not part of the investment component of GDP?

National income is the sum of

In the national income accounts, the symbol G represents the

In calculating the nation's total output, net exports do not

Table 8-1 According to the data in Table 8-1, the value of GDP is

National income can be calculated by subtracting

Every Christmas, you buy yourself a lottery ticket. This year, you win the $500 million Powerball. This would most likely cause your consumption function to

When the price level falls, consumers may feel wealthier and the consumption function will shift upward.

Suppose the federal government wants to encourage businesses to increase investment spending. Which policy may be the most effective?

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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