Question 1

The sum of money spent by a person to purchase a new home is considered as a part of investment spending.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following variables is a flow concept?

Accepted Answer

A)  Gross domestic product 
B)  Assets 
C)  Wealth 
D)  Money supply 
E)  Saving 
A)  Gross domestic product 
B)  Assets 
C)  Wealth 
D)  Money supply 
E)  Saving

Question 3

As an household's wealth increases, it will experience a(n):

Accepted Answer

A)  increase in its MPC. 
B)  decrease in autonomous consumption. 
C)  decrease in its MPS. 
D)  increase in autonomous consumption. 
E)  increase in autonomous saving. 
A)  increase in its MPC. 
B)  decrease in autonomous consumption. 
C)  decrease in its MPS. 
D)  increase in autonomous consumption. 
E)  increase in autonomous saving.

Question 4

The figure given below shows the consumption functions of an economy.?Figure 9.4
  
-Refer to the Figure 9.4. If the economy is in equilibrium at A, which of the following is most likely to occur if consumers expect a period of rapid economic expansion?

Accepted Answer

A)  The equilibrium will move from point A to point F. 
B)  The equilibrium will move from point A to point C. 
C)  There will be a new equilibrium disposable income at point G. 
D)  The equilibrium will remain at point A. 
E)  There will be a new equilibrium disposable income at point E. 
A)  The equilibrium will move from point A to point F. 
B)  The equilibrium will move from point A to point C. 
C)  There will be a new equilibrium disposable income at point G. 
D)  The equilibrium will remain at point A. 
E)  There will be a new equilibrium disposable income at point E.

Question 5

The consumption function has a positive slope while the savings function has a negative slope.

Accepted Answer

A) True 
 B)False

Question 6

Suppose that the consumption function crosses the 45-degree line at a disposable income level of $800. Assume further that saving equals $200 when disposable income is $1,300. This implies that the MPC must equal 0.6.

Accepted Answer

A) True 
 B)False

Question 7

The figure given below represents the consumption function of a country.?Figure 9.3
  
-According to Figure 9.3, autonomous consumption equals:

Accepted Answer

A)  -$200. 
B)  $0. 
C)  $100. 
D)  $200. 
E)  $400. 
A)  -$200. 
B)  $0. 
C)  $100. 
D)  $200. 
E)  $400.

Question 8

The figure given below represents the saving function of an economy.?Figure 9.1
  
-Refer to Figure 9.1. Which of the following statements is true for real GDP levels below $400 billion?

Accepted Answer

A)  Saving exists because consumption is smaller than disposable income. 
B)  Saving does not exist because consumption exceeds disposable income. 
C)  The corresponding section of the consumption function lies below the 45-degree line. 
D)  Autonomous consumption is equal to zero. 
E)  The slope of the consumption function becomes negative. 
A)  Saving exists because consumption is smaller than disposable income. 
B)  Saving does not exist because consumption exceeds disposable income. 
C)  The corresponding section of the consumption function lies below the 45-degree line. 
D)  Autonomous consumption is equal to zero. 
E)  The slope of the consumption function becomes negative.

Question 9

The figure given below represents the consumption function of a country.?Figure 9.3
  
-Refer to Figure 9.3. Calculate the marginal propensity to consume.

Accepted Answer

A)  0.7 
B)  0.1 
C)  0.4 
D)  0.25 
E)  0.5 
A)  0.7 
B)  0.1 
C)  0.4 
D)  0.25 
E)  0.5

Question 10

The figure given below shows the consumption functions of an economy.?Figure 9.4
  
-Refer to Figure 9.4. Which of the following could explain a downward shift of the consumption function from C₁ to C₃?

Accepted Answer

A)  An increase in household wealth 
B)  A decrease in the proportion of young people in the population 
C)  An increase in the size of the population 
D)  A decrease in consumer confidence 
E)  An autonomous decrease in saving 
A)  An increase in household wealth 
B)  A decrease in the proportion of young people in the population 
C)  An increase in the size of the population 
D)  A decrease in consumer confidence 
E)  An autonomous decrease in saving

Question 11

If it is assumed that there are absolutely no taxes in an economy, then aggregate consumption will be drawn as a function of:

Accepted Answer

A)  disposable income. 
B)  real GDP. 
C)  government expenditure. 
D)  private income. 
E)  government transfers. 
A)  disposable income. 
B)  real GDP. 
C)  government expenditure. 
D)  private income. 
E)  government transfers.

Question 12

The marginal propensity to consume (MPC) is equal to the inverse of the marginal propensity to save (MPS).

Accepted Answer

A) True 
 B)False

Question 13

Which of the following variables do not change autonomous consumption?

Accepted Answer

A)  Demographics 
B)  Taxation 
C)  Expectation 
D)  Wealth 
E)  Disposable income 
A)  Demographics 
B)  Taxation 
C)  Expectation 
D)  Wealth 
E)  Disposable income

Question 14

Suppose two successive levels of disposable personal income are $16 and $21 billion, respectively, and the change in consumption spending between these two levels of disposable personal income is $2 billion, then the MPC will be equal to _____.

Accepted Answer

A)  0.12 
B)  0.8 
C)  0.7 
D)  0.4 
E)  0.04 
A)  0.12 
B)  0.8 
C)  0.7 
D)  0.4 
E)  0.04

Question 15

Which of the following is a determinant of investment?

Accepted Answer

A)  Technological change 
B)  Net exports 
C)  Demographics 
D)  Nominal GDP 
E)  Population 
A)  Technological change 
B)  Net exports 
C)  Demographics 
D)  Nominal GDP 
E)  Population

Question 16

The figure given below shows the consumption function of a household.?Figure 9.2
  
-In Figure 9.2, at any point to the left of point B:

Accepted Answer

A)  autonomous consumption is less than zero. 
B)  saving occurs. 
C)  disposable income is negative 
D)  consumption is greater than disposable income. 
E)  autonomous consumption is zero. 
A)  autonomous consumption is less than zero. 
B)  saving occurs. 
C)  disposable income is negative 
D)  consumption is greater than disposable income. 
E)  autonomous consumption is zero.

Question 17

The sum of consumption and saving is called _____.

Accepted Answer

A)  net investment 
B)  net income 
C)  personal income 
D)  disposable income 
E)  transfer payment 
A)  net investment 
B)  net income 
C)  personal income 
D)  disposable income 
E)  transfer payment

Question 18

Which of the following will cause the investment function to shift upward?

Accepted Answer

A)  A decrease in government subsidies to businesses 
B)  An increase in business profits 
C)  A decline in capacity utilization 
D)  Expectations of higher business taxes 
E)  An increase in the market rate of interest 
A)  A decrease in government subsidies to businesses 
B)  An increase in business profits 
C)  A decline in capacity utilization 
D)  Expectations of higher business taxes 
E)  An increase in the market rate of interest

Question 19

Identify the correct statement.

Accepted Answer

A)  Autonomous consumption equals saving when disposable income is equal to zero. 
B)  Saving is equal to consumption when autonomous consumption is zero. 
C)  The savings function always has a positive intercept when autonomous consumption is positive. 
D)  The consumption and saving function intersect each other when disposable income is zero. 
E)  Autonomous consumption is positive even when disposable income is zero. 
A)  Autonomous consumption equals saving when disposable income is equal to zero. 
B)  Saving is equal to consumption when autonomous consumption is zero. 
C)  The savings function always has a positive intercept when autonomous consumption is positive. 
D)  The consumption and saving function intersect each other when disposable income is zero. 
E)  Autonomous consumption is positive even when disposable income is zero.

Question 20

Suppose the Kwik Print Company considers an investment project that involves the purchase of a copier with an expected output of $4,000. If the firm has to borrow $3,000 and the rate of return is 11.1 percent, then the interest rate associated with the loan must be 20 percent.

Accepted Answer

A) True 
 B)False

Exam 9: Aggregate Expenditures

The sum of money spent by a person to purchase a new home is considered as a part of investment spending.

Which of the following variables is a flow concept?

As an household's wealth increases, it will experience a(n):

The figure given below shows the consumption functions of an economy.?Figure 9.4 -Refer to the Figure 9.4. If the economy is in equilibrium at A, which of the following is most likely to occur if consumers expect a period of rapid economic expansion?

The consumption function has a positive slope while the savings function has a negative slope.

Suppose that the consumption function crosses the 45-degree line at a disposable income level of $800. Assume further that saving equals $200 when disposable income is $1,300. This implies that the MPC must equal 0.6.

The figure given below represents the consumption function of a country.?Figure 9.3 -According to Figure 9.3, autonomous consumption equals:

The figure given below represents the saving function of an economy.?Figure 9.1 -Refer to Figure 9.1. Which of the following statements is true for real GDP levels below $400 billion?

The figure given below represents the consumption function of a country.?Figure 9.3 -Refer to Figure 9.3. Calculate the marginal propensity to consume.

The figure given below shows the consumption functions of an economy.?Figure 9.4 -Refer to Figure 9.4. Which of the following could explain a downward shift of the consumption function from C₁ to C₃?

If it is assumed that there are absolutely no taxes in an economy, then aggregate consumption will be drawn as a function of:

The marginal propensity to consume (MPC) is equal to the inverse of the marginal propensity to save (MPS).

Which of the following variables do not change autonomous consumption?

Suppose two successive levels of disposable personal income are $16 and $21 billion, respectively, and the change in consumption spending between these two levels of disposable personal income is $2 billion, then the MPC will be equal to _____.

Which of the following is a determinant of investment?

The figure given below shows the consumption function of a household.?Figure 9.2 -In Figure 9.2, at any point to the left of point B:

The sum of consumption and saving is called _____.

Which of the following will cause the investment function to shift upward?

Identify the correct statement.

Suppose the Kwik Print Company considers an investment project that involves the purchase of a copier with an expected output of $4,000. If the firm has to borrow $3,000 and the rate of return is 11.1 percent, then the interest rate associated with the loan must be 20 percent.

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

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