Question 1

A decline in the real interest rate will shift the investment demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 2

Given the consumption schedule,it is possible to graph the relevant saving schedule by:

Accepted Answer

A)  subtracting the MPC from 1 at each level of income. 
B)  subtracting investment from consumption at each level of GDP. 
C)  plotting the horizontal differences between the consumption schedule and the 45-degree line. 
D)  plotting the vertical differences between the consumption schedule and the 45-degree line. 
A)  subtracting the MPC from 1 at each level of income. 
B)  subtracting investment from consumption at each level of GDP. 
C)  plotting the horizontal differences between the consumption schedule and the 45-degree line. 
D)  plotting the vertical differences between the consumption schedule and the 45-degree line.

Question 3

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.   Refer to the given data.The marginal propensity to consume in economy (1)is:

Accepted Answer

A)  .5. 
B)  .3. 
C)  .8. 
D)  .7. 
A)  .5. 
B)  .3. 
C)  .8. 
D)  .7.

Question 4

Which of the following is correct?

Accepted Answer

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

Question 5

(Advanced analysis)Answer the question on the basis of the following data: $\begin{array} { c c } 
\text { Disposable Income } \left( \mathrm { Y } _ { \mathrm { d } } \right) & \text { Consumption (C) } \
\$ 0 & \$ 40 \
100 & 100 \
200 & 160 \
300 & 220 \
400 & 280
\end{array}$ Which of the following equations correctly represents the given data?

Accepted Answer

A)  Yd = 40 + .6C. 
B)  C = 60 + .4Yd. 
C)  C = 40 + .6Yd. 
D)  C = .6Yd. 
A)  Yd = 40 + .6C. 
B)  C = 60 + .4Yd. 
C)  C = 40 + .6Yd. 
D)  C = .6Yd.

Question 6

The numerical value of the multiplier will be smaller the:

Accepted Answer

A)  larger the average propensity to consume. 
B)  larger the slope of the saving schedule. 
C)  larger the slope of the consumption schedule. 
D)  smaller the slope of the saving schedule. 
A)  larger the average propensity to consume. 
B)  larger the slope of the saving schedule. 
C)  larger the slope of the consumption schedule. 
D)  smaller the slope of the saving schedule.

Question 7

Assume a machine that has a useful life of only one year costs $2,000.Assume,also,that net of such operating costs as power,taxes,and so forth,the additional revenue from the output of this machine is expected to be $2,300.If the firm finds it can borrow funds at an interest rate of 10 percent,the firm should:

Accepted Answer

A)  not purchase the machine because the expected rate of return exceeds the interest rate. 
B)  not purchase the machine because the interest rate exceeds the expected rate of return. 
C)  purchase the machine because the expected rate of return exceeds the interest rate. 
D)  purchase the machine because the interest rate exceeds the expected rate of return. 
A)  not purchase the machine because the expected rate of return exceeds the interest rate. 
B)  not purchase the machine because the interest rate exceeds the expected rate of return. 
C)  purchase the machine because the expected rate of return exceeds the interest rate. 
D)  purchase the machine because the interest rate exceeds the expected rate of return.

Question 8

If a $100 billion decrease in investment spending causes income to decline by $100 billion in the first round of the multiplier process and by $75 billion in the second round,income will eventually decline by:

Accepted Answer

A)  $200 billion. 
B)  $300 billion. 
C)  $400 billion. 
D)  $500 billion. 
A)  $200 billion. 
B)  $300 billion. 
C)  $400 billion. 
D)  $500 billion.

Question 9

The most important determinant of consumption and saving is the:

Accepted Answer

A)  level of bank credit. 
B)  level of income. 
C)  interest rate. 
D)  price level. 
A)  level of bank credit. 
B)  level of income. 
C)  interest rate. 
D)  price level.

Question 10

The immediate determinants of investment spending are the:

Accepted Answer

A)  expected rate of return on capital goods and the real interest rate. 
B)  level of saving and the real interest rate. 
C)  marginal propensity to consume and the real interest rate. 
D)  interest rate and the expected price level. 
A)  expected rate of return on capital goods and the real interest rate. 
B)  level of saving and the real interest rate. 
C)  marginal propensity to consume and the real interest rate. 
D)  interest rate and the expected price level.

Question 11

In annual percentage terms,investment spending in the United States is:

Accepted Answer

A)  less variable than real GDP. 
B)  less variable than consumption spending. 
C)  less variable than the price level. 
D)  more variable than real GDP. 
A)  less variable than real GDP. 
B)  less variable than consumption spending. 
C)  less variable than the price level. 
D)  more variable than real GDP.

Question 12

If the nominal interest rate is 18 percent and the real interest rate is 6 percent,the inflation rate is:

Accepted Answer

A)  18 percent. 
B)  24 percent. 
C)  12 percent. 
D)  6 percent. 
A)  18 percent. 
B)  24 percent. 
C)  12 percent. 
D)  6 percent.

Question 13

The multiplier can be calculated as:

Accepted Answer

A)  1/(MPS + MP
C) . 
B)  MPC/MPS. 
C)  1/(1 - MP
C) . 
D)  1 - MPC = MPS. 
A)  1/(MPS + MP
C) . 
B)  MPC/MPS. 
C)  1/(1 - MP
C) . 
D)  1 - MPC = MPS.

Question 14

Given the expected rate of return on all possible investment opportunities in the economy:

Accepted Answer

A)  an increase in the real rate of interest will reduce the level of investment. 
B)  a decrease in the real rate of interest will reduce the level of investment. 
C)  a change in the real interest rate will have no impact on the level of investment. 
D)  an increase in the real interest rate will increase the level of investment. 
A)  an increase in the real rate of interest will reduce the level of investment. 
B)  a decrease in the real rate of interest will reduce the level of investment. 
C)  a change in the real interest rate will have no impact on the level of investment. 
D)  an increase in the real interest rate will increase the level of investment.

Question 15

If the MPC is .9 and investment spending increases by $20 billion,real GDP will increase by $200 billion.

Accepted Answer

A) True 
 B)False

Question 16

Assume the MPC is 2/3.If investment spending increases by $2 billion,the level of GDP will increase by:

Accepted Answer

A)  $3 billion. 
B)  $2/3 billion. 
C)  $6 billion. 
D)  $2 billion. 
A)  $3 billion. 
B)  $2/3 billion. 
C)  $6 billion. 
D)  $2 billion.

Question 17

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.   Refer to the given data.At an income level of $400 billion,the average propensity to save in economy (2)is:

Accepted Answer

A)  .9125. 
B)  .0725. 
C)  .0875. 
D)  .9305. 
A)  .9125. 
B)  .0725. 
C)  .0875. 
D)  .9305.

Question 18

The APC is calculated as:

Accepted Answer

A)  change in consumption/change in income. 
B)  consumption/income. 
C)  change in income/change in consumption. 
D)  income/consumption. 
A)  change in consumption/change in income. 
B)  consumption/income. 
C)  change in income/change in consumption. 
D)  income/consumption.

Question 19

Investment spending in the United States tends to be unstable because:

Accepted Answer

A)  expected profits are highly variable. 
B)  capital goods are durable. 
C)  innovation occurs at an irregular pace. 
D)  all of these contribute to the instability. 
A)  expected profits are highly variable. 
B)  capital goods are durable. 
C)  innovation occurs at an irregular pace. 
D)  all of these contribute to the instability.

Question 20

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.   Refer to the given data.At an income level of $40 billion,the average propensity to consume:

Accepted Answer

A)  is highest in economy (1). 
B)  is highest in economy (2). 
C)  is highest in economy (3). 
D)  cannot be determined from the data given. 
A)  is highest in economy (1). 
B)  is highest in economy (2). 
C)  is highest in economy (3). 
D)  cannot be determined from the data given.

A decline in the real interest rate will shift the investment demand curve to the right.

Given the consumption schedule,it is possible to graph the relevant saving schedule by:

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the given data.The marginal propensity to consume in economy (1)is:

Which of the following is correct?

(Advanced analysis)Answer the question on the basis of the following data: Disposable Income Consumption (C) \ 0 \ 40 100 100 200 160 300 220 400 280 Which of the following equations correctly represents the given data?

The numerical value of the multiplier will be smaller the:

If a $100 billion decrease in investment spending causes income to decline by $100 billion in the first round of the multiplier process and by $75 billion in the second round,income will eventually decline by:

The most important determinant of consumption and saving is the:

The immediate determinants of investment spending are the:

In annual percentage terms,investment spending in the United States is:

If the nominal interest rate is 18 percent and the real interest rate is 6 percent,the inflation rate is:

The multiplier can be calculated as:

Given the expected rate of return on all possible investment opportunities in the economy:

If the MPC is .9 and investment spending increases by $20 billion,real GDP will increase by $200 billion.

Assume the MPC is 2/3.If investment spending increases by $2 billion,the level of GDP will increase by:

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the given data.At an income level of $400 billion,the average propensity to save in economy (2)is:

The APC is calculated as:

Investment spending in the United States tends to be unstable because:

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the given data.At an income level of $40 billion,the average propensity to consume:

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

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Exam 29: Basic Macroeconomic Relationships

A decline in the real interest rate will shift the investment demand curve to the right.

Given the consumption schedule,it is possible to graph the relevant saving schedule by:

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the given data.The marginal propensity to consume in economy (1)is:

Which of the following is correct?

(Advanced analysis)Answer the question on the basis of the following data: Disposable Income Consumption (C) \ 0 \ 40 100 100 200 160 300 220 400 280 Which of the following equations correctly represents the given data?

The numerical value of the multiplier will be smaller the:

If a $100 billion decrease in investment spending causes income to decline by $100 billion in the first round of the multiplier process and by $75 billion in the second round,income will eventually decline by:

The most important determinant of consumption and saving is the:

The immediate determinants of investment spending are the:

In annual percentage terms,investment spending in the United States is:

If the nominal interest rate is 18 percent and the real interest rate is 6 percent,the inflation rate is:

The multiplier can be calculated as:

Given the expected rate of return on all possible investment opportunities in the economy:

If the MPC is .9 and investment spending increases by $20 billion,real GDP will increase by $200 billion.

Assume the MPC is 2/3.If investment spending increases by $2 billion,the level of GDP will increase by:

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the given data.At an income level of $400 billion,the average propensity to save in economy (2)is:

The APC is calculated as:

Investment spending in the United States tends to be unstable because:

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the given data.At an income level of $40 billion,the average propensity to consume:

Income Inequality Poverty and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

The Balance of Payments, Exchange Rates, and Trade Deficits

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

The United States and the Global Economy

Filters