Question 1

The equation   is the

Accepted Answer

A)  average propensity to consume. 
B)  average propensity to save. 
C)  marginal propensity to consume. 
D)  marginal propensity to save. 
A)  average propensity to consume. 
B)  average propensity to save. 
C)  marginal propensity to consume. 
D)  marginal propensity to save.

Question 2

Spending by businesses on things such as machines and buildings which can be used to produce goods and services in the future is

Accepted Answer

A)  investment. 
B)  consumption. 
C)  consumption goods. 
D)  savings. 
A)  investment. 
B)  consumption. 
C)  consumption goods. 
D)  savings.

Question 3

If the marginal propensity to consume (MPC) is 0.9, then the multiplier for a change in autonomous spending will be

Accepted Answer

A)  0.1. 
B)  9. 
C)  10. 
D)  100. 
A)  0.1. 
B)  9. 
C)  10. 
D)  100.

Question 4

Suppose government spending decreases by $100 billion and the marginal propensity to consume (MPC) is 0.8. Given this information, this decrease in government spending will cause a(n)

Accepted Answer

A)  increase in equilibrium real GDP equal to $500 billion. 
B)  increase in equilibrium real GDP equal to $800 billion. 
C)  decrease in equilibrium real GDP equal to $500 billion. 
D)  decrease in equilibrium real GDP equal to $800 billion. 
A)  increase in equilibrium real GDP equal to $500 billion. 
B)  increase in equilibrium real GDP equal to $800 billion. 
C)  decrease in equilibrium real GDP equal to $500 billion. 
D)  decrease in equilibrium real GDP equal to $800 billion.

Question 5

Your real disposable income is your real income after you have paid

Accepted Answer

A)  rent and food expenses. 
B)  net taxes. 
C)  medical expenses. 
D)  consumption expenses. 
A)  rent and food expenses. 
B)  net taxes. 
C)  medical expenses. 
D)  consumption expenses.

Question 6

If the multiplier has a value of 10, then the value of the marginal propensity to save (MPS) is

Accepted Answer

A)  1.00. 
B)  0.90. 
C)  10.00. 
D)  0.10. 
A)  1.00. 
B)  0.90. 
C)  10.00. 
D)  0.10.

Question 7

In the Keynesian model, whenever planned investment is less than planned saving,

Accepted Answer

A)  the amount of planned investment will decrease, and real GDP will decrease. 
B)  the amount of planned investment will decrease, and real GDP will remain unchanged. 
C)  there will be an unplanned inventory decrease, and real GDP will eventually increase. 
D)  there will be an unplanned inventory increase, and real GDP will eventually decrease. 
A)  the amount of planned investment will decrease, and real GDP will decrease. 
B)  the amount of planned investment will decrease, and real GDP will remain unchanged. 
C)  there will be an unplanned inventory decrease, and real GDP will eventually increase. 
D)  there will be an unplanned inventory increase, and real GDP will eventually decrease.

Question 8

A rise in the price level causes

Accepted Answer

A)  an increase in aggregate demand. 
B)  a decrease in aggregate demand. 
C)  a reduction in total planned real expenditures. 
D)  an increase in total planned real expenditures. 
A)  an increase in aggregate demand. 
B)  a decrease in aggregate demand. 
C)  a reduction in total planned real expenditures. 
D)  an increase in total planned real expenditures.

Question 9

Which of the following statements is true?

Accepted Answer

A)  APC + APS = 1 
B)  APC + APS < 1 
C)  APC + MPS = 1 
D)  APC + APS + MPC + MPS = 1 
A)  APC + APS = 1 
B)  APC + APS < 1 
C)  APC + MPS = 1 
D)  APC + APS + MPC + MPS = 1

Question 10

-In the above figure, at an income level of Y1 and planned expenditures of (C + I)1, the level of autonomous investment is

Accepted Answer

A)  ED. 
B)  EF. 
C)  JK. 
D)  GK. 
A)  ED. 
B)  EF. 
C)  JK. 
D)  GK.

Question 11

The relationship between planned real consumption expenditures of households and their current level of real disposable income is

Accepted Answer

A)  investment. 
B)  dissaving. 
C)  saving. 
D)  the consumption function. 
A)  investment. 
B)  dissaving. 
C)  saving. 
D)  the consumption function.

Question 12

The consumption function shows how much

Accepted Answer

A)  households plan to consume per year at each level of real disposable income. 
B)  households plan to consume per year at each possible interest rate. 
C)  real disposable income people will earn at each income tax bracket. 
D)  households plan to consume per year at each level of savings. 
A)  households plan to consume per year at each level of real disposable income. 
B)  households plan to consume per year at each possible interest rate. 
C)  real disposable income people will earn at each income tax bracket. 
D)  households plan to consume per year at each level of savings.

Question 13

Which of the following is NOT a simplifying assumption in the simple Keynesian model?

Accepted Answer

A)  Net investment and gross investment are equal. 
B)  All profits are distributed to the business owners. 
C)  Real disposable income equals government purchases of goods and services. 
D)  There is no foreign trade. 
A)  Net investment and gross investment are equal. 
B)  All profits are distributed to the business owners. 
C)  Real disposable income equals government purchases of goods and services. 
D)  There is no foreign trade.

Question 14

The slope of the saving function is the

Accepted Answer

A)  MPC. 
B)  APC. 
C)  MPS. 
D)  APS. 
A)  MPC. 
B)  APC. 
C)  MPS. 
D)  APS.

Question 15

-Refer to the above figure. Which variable is autonomous with respect to real GDP?

Accepted Answer

A)  Real saving 
B)  Real investment spending 
C)  Real consumption spending 
D)  The sum of real consumption and real saving 
A)  Real saving 
B)  Real investment spending 
C)  Real consumption spending 
D)  The sum of real consumption and real saving

Question 16

The consumption function shows the relationship between planned real consumption spending and

Accepted Answer

A)  real disposable income. 
B)  planned real saving. 
C)  the average propensity to consume. 
D)  the marginal propensity to consume. 
A)  real disposable income. 
B)  planned real saving. 
C)  the average propensity to consume. 
D)  the marginal propensity to consume.

Question 17

Suppose autonomous consumption is $1 trillion, investment spending is $1.5 trillion, and the marginal propensity to consume is 0.75. Show the graph for the C + I curve. What is the equilibrium level of real GDP? Explain its meaning.

Accepted Answer

In the below figure, the C curve has a v

Question 18

-Consider the above figure. At income level   = $110, the APS is equal to

Accepted Answer

A)  0.64. 
B)  0.32 
C)  1.10. 
D)  -0.36. 
A)  0.64. 
B)  0.32 
C)  1.10. 
D)  -0.36.

Question 19

An increase in the interest rate results in

Accepted Answer

A)  a smaller opportunity cost of investment and so planned investment spending increases. 
B)  a smaller opportunity cost of investment and so planned investment spending decreases. 
C)  a greater opportunity cost of investment and so planned investment spending decreases. 
D)  a greater opportunity cost of investment and so planned investment spending increases. 
A)  a smaller opportunity cost of investment and so planned investment spending increases. 
B)  a smaller opportunity cost of investment and so planned investment spending decreases. 
C)  a greater opportunity cost of investment and so planned investment spending decreases. 
D)  a greater opportunity cost of investment and so planned investment spending increases.

Question 20

Which formula is correct?

Accepted Answer

A)  S =   - C 
B)    + S = C 
C)  2(   ) - S = C 
D)    + C = S 
A)  S =   - C 
B)    + S = C 
C)  2(   ) - S = C 
D)    + C = S

Exam 12: Consumption, Real GDP, and the Multiplier

The equation is the

Spending by businesses on things such as machines and buildings which can be used to produce goods and services in the future is

If the marginal propensity to consume (MPC) is 0.9, then the multiplier for a change in autonomous spending will be

Suppose government spending decreases by $100 billion and the marginal propensity to consume (MPC) is 0.8. Given this information, this decrease in government spending will cause a(n)

Your real disposable income is your real income after you have paid

If the multiplier has a value of 10, then the value of the marginal propensity to save (MPS) is

In the Keynesian model, whenever planned investment is less than planned saving,

A rise in the price level causes

Which of the following statements is true?

-In the above figure, at an income level of Y1 and planned expenditures of (C + I)1, the level of autonomous investment is

The relationship between planned real consumption expenditures of households and their current level of real disposable income is

The consumption function shows how much

Which of the following is NOT a simplifying assumption in the simple Keynesian model?

The slope of the saving function is the

-Refer to the above figure. Which variable is autonomous with respect to real GDP?

The consumption function shows the relationship between planned real consumption spending and

Suppose autonomous consumption is $1 trillion, investment spending is $1.5 trillion, and the marginal propensity to consume is 0.75. Show the graph for the C + I curve. What is the equilibrium level of real GDP? Explain its meaning.

-Consider the above figure. At income level = $110, the APS is equal to

An increase in the interest rate results in

Which formula is correct?

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

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

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

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

Filters

-In the above figure, at an income level of Y₁ and planned expenditures of (C + I)₁, the level of autonomous investment is