Question 1

Which of the following is considered investment?

Accepted Answer

A) Maina purchases a new car for commuting to and from work. 
B) Jane purchases a new car for commuting to and from school. 
C) Johnny buys a new car for his wife as an anniversary gift. 
D) James purchases a new car to replace an old car in his cab business. 
A) Maina purchases a new car for commuting to and from work. 
B) Jane purchases a new car for commuting to and from school. 
C) Johnny buys a new car for his wife as an anniversary gift. 
D) James purchases a new car to replace an old car in his cab business.

Question 2

Based on historical data, which of the following tended to be most variable over time?

Accepted Answer

A) real consumption spending 
B) real saving 
C) real investment spending 
D) the average propensity to consume 
A) real consumption spending 
B) real saving 
C) real investment spending 
D) the average propensity to consume

Question 3

All of the following would cause the investment function relating investment to the interest rate to shift EXCEPT

Accepted Answer

A) a change in the real interest rate. 
B) a change in producer expectations of future profit. 
C) a change in planned capital goods expenditure. 
D) a change in productive technology. 
A) a change in the real interest rate. 
B) a change in producer expectations of future profit. 
C) a change in planned capital goods expenditure. 
D) a change in productive technology.

Question 4

If the marginal propensity to save is 0.4 and disposable income increases from $1,000 to $1,500, saving will increase

Accepted Answer

A) $100. 
B) $200. 
C) $300. 
D) $400. 
A) $100. 
B) $200. 
C) $300. 
D) $400.

Question 5

The saving function shows the relationship between planned real saving and

Accepted Answer

A) real wealth. 
B) real disposable income. 
C) the average propensity to save. 
D) the marginal propensity to save. 
A) real wealth. 
B) real disposable income. 
C) the average propensity to save. 
D) the marginal propensity to save.

Question 6

When consumption spending is greater than disposable income, we know with certainty that we have

Accepted Answer

A) dissaving. 
B) excess thrift. 
C) positive savings. 
D) negative net investment. 
A) dissaving. 
B) excess thrift. 
C) positive savings. 
D) negative net investment.

Question 7

If initial equilibrium real Gross Domestic Product (GDP)is $400 billion, MPC = 0.9, and autonomous investment increases $40 billion, equilibrium real Gross Domestic Product (GDP)will be

Accepted Answer

A) $440 billion. 
B) $360 billion. 
C) $600 billion. 
D) $800 billion. 
A) $440 billion. 
B) $360 billion. 
C) $600 billion. 
D) $800 billion.

Question 8

How does a reduction in the price level affect the position of the C + I + G + X curve and in turn the equilibrium level of real GDP?

Accepted Answer

A) The C + I + G + X curve shifts down, thereby reducing the equilibrium level of real GDP. 
B) The C + I + G + X curve shifts down, thereby increasing the equilibrium level of real GDP. 
C) The C + I + G + X curve shifts up, thereby reducing the equilibrium level of real GDP. 
D) The C + I + G + X curve shifts up, thereby increasing the equilibrium level of real GDP. 
A) The C + I + G + X curve shifts down, thereby reducing the equilibrium level of real GDP. 
B) The C + I + G + X curve shifts down, thereby increasing the equilibrium level of real GDP. 
C) The C + I + G + X curve shifts up, thereby reducing the equilibrium level of real GDP. 
D) The C + I + G + X curve shifts up, thereby increasing the equilibrium level of real GDP.

Question 9

Suppose marginal propensity to consume (MPC)is 0.7 and there is a $1,000 increase in autonomous consumption. Given this information, real GDP will increase by

Accepted Answer

A) $3,333. 
B) $1,429. 
C) $1,000. 
D) $700. 
A) $3,333. 
B) $1,429. 
C) $1,000. 
D) $700.

Question 10

The relationship that tells us how much a person intends to spend at various levels of income is

Accepted Answer

A) the spending function. 
B) the expenditure function. 
C) the consumption function. 
D) the buying function. 
A) the spending function. 
B) the expenditure function. 
C) the consumption function. 
D) the buying function.

Question 11

If an economy saves 20 percent of any increase in real Gross Domestic Product (GDP), then an increase in investment of $2 billion can produce an increase in real Gross Domestic Product (GDP)of as much as

Accepted Answer

A) $2 billion. 
B) $10 billion. 
C) $0.4 billion. 
D) $1.6 billion. 
A) $2 billion. 
B) $10 billion. 
C) $0.4 billion. 
D) $1.6 billion.

Question 12

-In the above table, the marginal propensity to save when disposable income changes from $1,000 to $2,000 is

Accepted Answer

A) 0.1. 
B) 0.2. 
C) 0.8. 
D) -0.2. 
A) 0.1. 
B) 0.2. 
C) 0.8. 
D) -0.2.

Question 13

When the average propensity to save (APS)is 0.20, then this means

Accepted Answer

A) people are spending 20 percent of their disposable income. 
B) people are spending 80 percent of their disposable income. 
C) people are saving $0.20 of the last dollar earned. 
D) people are spending 60 percent of their disposable income and investing the remaining 20 percent. 
A) people are spending 20 percent of their disposable income. 
B) people are spending 80 percent of their disposable income. 
C) people are saving $0.20 of the last dollar earned. 
D) people are spending 60 percent of their disposable income and investing the remaining 20 percent.

Question 14

Investment is

Accepted Answer

A) a flow concept and is made up of fixed investment and inventory investment. 
B) a flow concept and is made up of fixed investment. 
C) a stock concept and is made up of fixed investment and inventory investment. 
D) a stock concept and is made up of fixed investment. 
A) a flow concept and is made up of fixed investment and inventory investment. 
B) a flow concept and is made up of fixed investment. 
C) a stock concept and is made up of fixed investment and inventory investment. 
D) a stock concept and is made up of fixed investment.

Question 15

Suppose when real disposable income is $5000, planned real consumption is $4000. When real disposable income increases to $6000, planned real saving increases by $500. The new planned real consumption expenditures is

Accepted Answer

A) $5,000. 
B) $4,500. 
C) $6,000. 
D) $3,500. 
A) $5,000. 
B) $4,500. 
C) $6,000. 
D) $3,500.

Question 16

Distinguish between saving and savings. How does investment relate to this distinction, if at all?

Accepted Answer

Saving is a flow concept and savings is

Question 17

An increase in planned real investment spending causes

Accepted Answer

A) a movement along the C + I + G + X curve and a shift of the aggregate demand curve. 
B) a shift of the C + I + G + X curve and a movement along the aggregate demand curve. 
C) a shift of the C + I + G + X curve but has no effect on the aggregate demand curve. 
D) a shift of the C + I + G + X curve that causes the aggregate demand curve to shift. 
A) a movement along the C + I + G + X curve and a shift of the aggregate demand curve. 
B) a shift of the C + I + G + X curve and a movement along the aggregate demand curve. 
C) a shift of the C + I + G + X curve but has no effect on the aggregate demand curve. 
D) a shift of the C + I + G + X curve that causes the aggregate demand curve to shift.

Question 18

Which of the following represents the relationship between disposable income (DI), consumption (C), and saving (S)?

Accepted Answer

A) DI + C = S 
B) DI = C + S 
C) DI = C * S 
D) DI = C - S 
A) DI + C = S 
B) DI = C + S 
C) DI = C * S 
D) DI = C - S

Question 19

According to Keynes, the primary determinant of a person's saving is NOT

Accepted Answer

A) the person's level of income but the desired real income of the person. 
B) the person's level of savings but the expected interest rate in the near future. 
C) the interest rate but the level of savings the person has. 
D) the interest rate but the level of the person's real disposable income. 
A) the person's level of income but the desired real income of the person. 
B) the person's level of savings but the expected interest rate in the near future. 
C) the interest rate but the level of savings the person has. 
D) the interest rate but the level of the person's real disposable income.

Question 20

As real disposable income increases, consumption expenditures

Accepted Answer

A) increase by the same amount. 
B) increase by a smaller amount. 
C) increase by a larger amount. 
D) remain constant. 
A) increase by the same amount. 
B) increase by a smaller amount. 
C) increase by a larger amount. 
D) remain constant.

Which of the following is considered investment?

Based on historical data, which of the following tended to be most variable over time?

All of the following would cause the investment function relating investment to the interest rate to shift EXCEPT

If the marginal propensity to save is 0.4 and disposable income increases from $1,000 to $1,500, saving will increase

The saving function shows the relationship between planned real saving and

When consumption spending is greater than disposable income, we know with certainty that we have

If initial equilibrium real Gross Domestic Product (GDP)is $400 billion, MPC = 0.9, and autonomous investment increases $40 billion, equilibrium real Gross Domestic Product (GDP)will be

How does a reduction in the price level affect the position of the C + I + G + X curve and in turn the equilibrium level of real GDP?

Suppose marginal propensity to consume (MPC)is 0.7 and there is a $1,000 increase in autonomous consumption. Given this information, real GDP will increase by

The relationship that tells us how much a person intends to spend at various levels of income is

If an economy saves 20 percent of any increase in real Gross Domestic Product (GDP), then an increase in investment of $2 billion can produce an increase in real Gross Domestic Product (GDP)of as much as

-In the above table, the marginal propensity to save when disposable income changes from $1,000 to $2,000 is

When the average propensity to save (APS)is 0.20, then this means

Investment is

Suppose when real disposable income is $5000, planned real consumption is $4000. When real disposable income increases to $6000, planned real saving increases by $500. The new planned real consumption expenditures is

Distinguish between saving and savings. How does investment relate to this distinction, if at all?

An increase in planned real investment spending causes

Which of the following represents the relationship between disposable income (DI), consumption (C), and saving (S)?

According to Keynes, the primary determinant of a person's saving is NOT

As real disposable income increases, consumption expenditures

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 11: Consumption, Real GDP, and the Multiplier

Which of the following is considered investment?

Based on historical data, which of the following tended to be most variable over time?

All of the following would cause the investment function relating investment to the interest rate to shift EXCEPT

If the marginal propensity to save is 0.4 and disposable income increases from $1,000 to $1,500, saving will increase

The saving function shows the relationship between planned real saving and

When consumption spending is greater than disposable income, we know with certainty that we have

If initial equilibrium real Gross Domestic Product (GDP)is $400 billion, MPC = 0.9, and autonomous investment increases $40 billion, equilibrium real Gross Domestic Product (GDP)will be

How does a reduction in the price level affect the position of the C + I + G + X curve and in turn the equilibrium level of real GDP?

Suppose marginal propensity to consume (MPC)is 0.7 and there is a $1,000 increase in autonomous consumption. Given this information, real GDP will increase by

The relationship that tells us how much a person intends to spend at various levels of income is

If an economy saves 20 percent of any increase in real Gross Domestic Product (GDP), then an increase in investment of $2 billion can produce an increase in real Gross Domestic Product (GDP)of as much as

-In the above table, the marginal propensity to save when disposable income changes from $1,000 to $2,000 is

When the average propensity to save (APS)is 0.20, then this means

Investment is

Suppose when real disposable income is $5000, planned real consumption is $4000. When real disposable income increases to $6000, planned real saving increases by $500. The new planned real consumption expenditures is

Distinguish between saving and savings. How does investment relate to this distinction, if at all?

An increase in planned real investment spending causes

Which of the following represents the relationship between disposable income (DI), consumption (C), and saving (S)?

According to Keynes, the primary determinant of a person's saving is NOT

As real disposable income increases, consumption expenditures

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters