Question 1

If the marginal propensity to save (MPS) = 0.1, then

Accepted Answer

A)  the MPC = 0.9. 
B)  the APS = 0.1. 
C)  the APC = 0.9. 
D)  consumption equals $1,800 when income equals $2,000. 
A)  the MPC = 0.9. 
B)  the APS = 0.1. 
C)  the APC = 0.9. 
D)  consumption equals $1,800 when income equals $2,000.

Question 2

A lump-sum tax, such as a $1000 tax that every family must pay one time, is

Accepted Answer

A)  a type of income tax. 
B)  an autonomous tax. 
C)  negatively related to real GDP. 
D)  a regressive tax. 
A)  a type of income tax. 
B)  an autonomous tax. 
C)  negatively related to real GDP. 
D)  a regressive tax.

Question 3

-Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. What is the value of the average propensity to consume when real disposable income equals $14,000?

Accepted Answer

A)  0.09 
B)  0.7 
C)  0.91 
D)  1.1 
A)  0.09 
B)  0.7 
C)  0.91 
D)  1.1

Question 4

The size of the multiplier depends on

Accepted Answer

A)  the level of autonomous investment. 
B)  the marginal propensity to consume. 
C)  the level of net exports. 
D)  the level of autonomous consumption. 
A)  the level of autonomous investment. 
B)  the marginal propensity to consume. 
C)  the level of net exports. 
D)  the level of autonomous consumption.

Question 5

Which one of the following is true?

Accepted Answer

A)  APC + MPS = 1 
B)  APC + APS = 1 
C)  MPS + APS = 1 
D)  APC * APS = 1 
A)  APC + MPS = 1 
B)  APC + APS = 1 
C)  MPS + APS = 1 
D)  APC * APS = 1

Question 6

What happens as interest rates fall?

Accepted Answer

A)  The number of profitable investment opportunities declines. 
B)  The opportunity cost of using retained earnings to finance investment spending declines. 
C)  Planned investment spending also falls. 
D)  Planned investment spending remains constant since it depends on profit projections not interest rates. 
A)  The number of profitable investment opportunities declines. 
B)  The opportunity cost of using retained earnings to finance investment spending declines. 
C)  Planned investment spending also falls. 
D)  Planned investment spending remains constant since it depends on profit projections not interest rates.

Question 7

If the marginal propensity to consume (MPC) is 0.9, the spending multiplier will be

Accepted Answer

A)  10. 
B)  1.11. 
C)  0.9. 
D)  0.1. 
A)  10. 
B)  1.11. 
C)  0.9. 
D)  0.1.

Question 8

According to Keynes, the primary determinant of a person's saving is

Accepted Answer

A)  the nominal interest rate. 
B)  the real interest rate. 
C)  the level of the person's consumption spending. 
D)  the level of the person's real current income. 
A)  the nominal interest rate. 
B)  the real interest rate. 
C)  the level of the person's consumption spending. 
D)  the level of the person's real current income.

Question 9

When graphing the consumption function, we include a 45-degree reference line. What is true at the points at which the consumption function crosses this line?

Accepted Answer

A)  Planned real saving is zero. 
B)  Planned real consumption spending is zero. 
C)  Real disposable income is zero. 
D)  Real GDP is zero. 
A)  Planned real saving is zero. 
B)  Planned real consumption spending is zero. 
C)  Real disposable income is zero. 
D)  Real GDP is zero.

Question 10

-Refer to the above figure. If real Gross Domestic Product (GDP) is $6 trillion, then unplanned business inventories will

Accepted Answer

A)  rise. 
B)  be zero. 
C)  fall. 
D)  be equal to planned inventories. 
A)  rise. 
B)  be zero. 
C)  fall. 
D)  be equal to planned inventories.

Question 11

Thinking as an economist would, which is true of investment?

Accepted Answer

A)  It is the portion of disposable income that is not used for consumption or saving. 
B)  Investment represents spending on capital goods. 
C)  Investment is putting money into stocks and bonds. 
D)  Investment is a stock concept. 
A)  It is the portion of disposable income that is not used for consumption or saving. 
B)  Investment represents spending on capital goods. 
C)  Investment is putting money into stocks and bonds. 
D)  Investment is a stock concept.

Question 12

Technological progress should lead to

Accepted Answer

A)  an outward (rightward) shift in the investment function. 
B)  a downward movement of the investment function. 
C)  an unchanged investment function. 
D)  less saving. 
A)  an outward (rightward) shift in the investment function. 
B)  a downward movement of the investment function. 
C)  an unchanged investment function. 
D)  less saving.

Question 13

-Use the above table. Which of the following is true if real disposable income is $150?

Accepted Answer

A)  APC is less than MPC. 
B)  APC = 0.8. 
C)  APS = 0.2. 
D)  APS is less than MPS. 
A)  APC is less than MPC. 
B)  APC = 0.8. 
C)  APS = 0.2. 
D)  APS is less than MPS.

Question 14

At the point at which the consumption function intersects the 45 degree reference line

Accepted Answer

A)  planned real consumption equals real disposable income. 
B)  equilibrium output is supply determined equilibrium output is determined by both. 
C)  planned real saving equals real disposable income. 
D)  planned real consumption of real disposable income equals zero. 
A)  planned real consumption equals real disposable income. 
B)  equilibrium output is supply determined equilibrium output is determined by both. 
C)  planned real saving equals real disposable income. 
D)  planned real consumption of real disposable income equals zero.

Question 15

Suppose that aggregate demand increases along the upward sloping portion of the aggregate supply curve. What is the result?

Accepted Answer

A)  Nominal GDP and real GDP decrease by the same amount. 
B)  Nominal GDP and real GDP increase by the same amount. 
C)  Nominal GDP increases more than real GDP increases. 
D)  Real GDP increases more than nominal GDP increases. 
A)  Nominal GDP and real GDP decrease by the same amount. 
B)  Nominal GDP and real GDP increase by the same amount. 
C)  Nominal GDP increases more than real GDP increases. 
D)  Real GDP increases more than nominal GDP increases.

Question 16

Spending on new goods and services out of a household's current income is

Accepted Answer

A)  consumption. 
B)  the capital consumption allowance. 
C)  savings. 
D)  investment. 
A)  consumption. 
B)  the capital consumption allowance. 
C)  savings. 
D)  investment.

Question 17

If the MPC = 0.8, and planned autonomous investment increases by $80 billion, then equilibrium real GDP will increase by

Accepted Answer

A)  $64 billion. 
B)  $80 billion. 
C)  $320 billion. 
D)  $400 billion. 
A)  $64 billion. 
B)  $80 billion. 
C)  $320 billion. 
D)  $400 billion.

Question 18

Consumption goods

Accepted Answer

A)  include goods such as DVDs that firms hold in inventory. 
B)  are only the goods bought by households for immediate satisfaction. 
C)  include spending on machines and buildings so that goods can be produced in the future. 
D)  are goods that are used to make other goods. 
A)  include goods such as DVDs that firms hold in inventory. 
B)  are only the goods bought by households for immediate satisfaction. 
C)  include spending on machines and buildings so that goods can be produced in the future. 
D)  are goods that are used to make other goods.

Question 19

-In the above figure, when disposable income is greater than 600,

Accepted Answer

A)  saving is negative. 
B)  the MPC is greater than 1. 
C)  saving is positive. 
D)  the MPS is negative. 
A)  saving is negative. 
B)  the MPC is greater than 1. 
C)  saving is positive. 
D)  the MPS is negative.

Question 20

The marginal propensity to consume (MPC) is

Accepted Answer

A)  the rate at which real consumption spending changes over time. 
B)  the percentage of real disposable income saved. 
C)  the percentage of real disposable income consumed. 
D)  the percentage of an additional dollar of real disposable income that will go toward additional real consumption spending. 
A)  the rate at which real consumption spending changes over time. 
B)  the percentage of real disposable income saved. 
C)  the percentage of real disposable income consumed. 
D)  the percentage of an additional dollar of real disposable income that will go toward additional real consumption spending.

Exam 12: Consumption, Real GDP, and the Multiplier

If the marginal propensity to save (MPS) = 0.1, then

A lump-sum tax, such as a $1000 tax that every family must pay one time, is

-Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. What is the value of the average propensity to consume when real disposable income equals $14,000?

The size of the multiplier depends on

Which one of the following is true?

What happens as interest rates fall?

If the marginal propensity to consume (MPC) is 0.9, the spending multiplier will be

According to Keynes, the primary determinant of a person's saving is

When graphing the consumption function, we include a 45-degree reference line. What is true at the points at which the consumption function crosses this line?

-Refer to the above figure. If real Gross Domestic Product (GDP) is $6 trillion, then unplanned business inventories will

Thinking as an economist would, which is true of investment?

Technological progress should lead to

-Use the above table. Which of the following is true if real disposable income is $150?

At the point at which the consumption function intersects the 45 degree reference line

Suppose that aggregate demand increases along the upward sloping portion of the aggregate supply curve. What is the result?

Spending on new goods and services out of a household's current income is

If the MPC = 0.8, and planned autonomous investment increases by $80 billion, then equilibrium real GDP will increase by

Consumption goods

-In the above figure, when disposable income is greater than 600,

The marginal propensity to consume (MPC) is

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

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

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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

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

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Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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