Question 1

Which of the following is true of the autonomous investment and saving functions?

Accepted Answer

A) The autonomous investment function has a positive slope; the saving function is a horizontal line. 
B) The autonomous investment function has a negative slope; the saving function has a positive slope. 
C) The autonomous investment function is a horizontal line; the saving function has a positive slope. 
D) Both the autonomous investment function and the saving function slope upward. 
E) Both the autonomous investment function and the saving function slope downward. 
A) The autonomous investment function has a positive slope; the saving function is a horizontal line. 
B) The autonomous investment function has a negative slope; the saving function has a positive slope. 
C) The autonomous investment function is a horizontal line; the saving function has a positive slope. 
D) Both the autonomous investment function and the saving function slope upward. 
E) Both the autonomous investment function and the saving function slope downward.

Question 2

Expectations that the price level will rise in the future cause consumption to rise today.

Accepted Answer

A) True 
 B)False

Question 3

Although consumer spending has averaged about 90 percent of disposable income,in recent years the percentage of disposable income claimed by consumption has

Accepted Answer

A) risen to about 96 percent 
B) risen to 100 percent 
C) risen to 99 percent 
D) fallen to about 76 percent 
E) risen to about 98 percent 
A) risen to about 96 percent 
B) risen to 100 percent 
C) risen to 99 percent 
D) fallen to about 76 percent 
E) risen to about 98 percent

Question 4

An increase in the MPC will cause the consumption function to become steeper (rotate upwards).

Accepted Answer

A) True 
 B)False

Question 5

Expectations that the price level will decrease in the future will

Accepted Answer

A) make the current consumption function flatter 
B) shift the current consumption function downward 
C) result in a movement upward along the current consumption function 
D) result in a movement downward along the current consumption function 
E) make the current consumption function steeper 
A) make the current consumption function flatter 
B) shift the current consumption function downward 
C) result in a movement upward along the current consumption function 
D) result in a movement downward along the current consumption function 
E) make the current consumption function steeper

Question 6

More of society's resources will be channeled into capital when

Accepted Answer

A) interest rates are high 
B) households decide to save less of their income 
C) businesspeople have optimistic expectations about the future 
D) corporate income taxes increase 
E) aggregate income decreases 
A) interest rates are high 
B) households decide to save less of their income 
C) businesspeople have optimistic expectations about the future 
D) corporate income taxes increase 
E) aggregate income decreases

Question 7

Exhibit 9-4  
-Consider an economy with a consumption function like C1 in Exhibit 9-4.The economy is currently operating at A when interest rates go up.This would produce a movement from A to

Accepted Answer

A) B 
B) C 
C) D 
D) F 
E) H 
A) B 
B) C 
C) D 
D) F 
E) H

Question 8

If investment is autonomous,an increase in income will shift the investment function upward.

Accepted Answer

A) True 
 B)False

Question 9

The opportunity cost of investing in capital is the interest rate.

Accepted Answer

A) True 
 B)False

Question 10

Fluctuations in investment

Accepted Answer

A) account for almost all of the variability in GDP during expansions 
B) account for almost all of the variability in GDP 
C) account for almost all of the variability in GDP during recessions 
D) are larger during expansions than during recessions 
E) account for more of the variability in GDP than consumption does 
A) account for almost all of the variability in GDP during expansions 
B) account for almost all of the variability in GDP 
C) account for almost all of the variability in GDP during recessions 
D) are larger during expansions than during recessions 
E) account for more of the variability in GDP than consumption does

Question 11

When economists say investment is autonomous,they mean that investment is independent of the level of saving.

Accepted Answer

A) True 
 B)False

Question 12

Actual investment will be larger than planned investment if there is an unintended inventory accumulation.

Accepted Answer

A) True 
 B)False

Question 13

Sarah moves from Upperland,which has no taxes or transfer payments,to Lowerland,where she is hit with taxes of $2,000 and receives transfer payments of $3,000.She earns the same wage in both countries,but in Lowerland her disposable income is

Accepted Answer

A) $1,000 higher 
B) $1,000 lower 
C) $5,000 higher 
D) $2,000 lower 
E) $3,000 higher 
A) $1,000 higher 
B) $1,000 lower 
C) $5,000 higher 
D) $2,000 lower 
E) $3,000 higher

Question 14

The United States,with only one __________ of the world's population,accounts for about one __________ of the world's imports and one __________ of the world's exports.

Accepted Answer

A) twentieth,sixth,ninth 
B) sixth,ninth,twentieth 
C) ninth,twentieth,sixth 
D) twentieth,ninth,sixth 
E) ninth,sixth,twentieth 
A) twentieth,sixth,ninth 
B) sixth,ninth,twentieth 
C) ninth,twentieth,sixth 
D) twentieth,ninth,sixth 
E) ninth,sixth,twentieth

Question 15

The relationship between consumption and income is

Accepted Answer

A) negative and unstable 
B) positive and unstable 
C) negative and stable 
D) positive and stable 
E) impossible to describe without more data 
A) negative and unstable 
B) positive and unstable 
C) negative and stable 
D) positive and stable 
E) impossible to describe without more data

Question 16

Historically,consumption spending in the United States has

Accepted Answer

A) increased as a percentage of income 
B) remained approximately constant as a percentage of income 
C) decreased as a percentage of income 
D) remained constant over time 
E) increased more than income 
A) increased as a percentage of income 
B) remained approximately constant as a percentage of income 
C) decreased as a percentage of income 
D) remained constant over time 
E) increased more than income

Question 17

Which is true of disposable income?

Accepted Answer

A) it excludes transfer payments 
B) the portion of income is used solely for consumption 
C) it is that part of aggregate income that is taken in taxes by government 
D) all of disposable income contributes directly to aggregate expenditure 
E) disposable income equals consumption expenditures plus saving 
A) it excludes transfer payments 
B) the portion of income is used solely for consumption 
C) it is that part of aggregate income that is taken in taxes by government 
D) all of disposable income contributes directly to aggregate expenditure 
E) disposable income equals consumption expenditures plus saving

Question 18

A household that expects a decrease in disposable income in the future will

Accepted Answer

A) increase its current consumption spending 
B) decrease its current consumption spending 
C) maintain its current consumption spending 
D) increase its current consumption spending,then increase spending when income falls 
E) decrease its current consumption spending,then increase spending when income falls 
A) increase its current consumption spending 
B) decrease its current consumption spending 
C) maintain its current consumption spending 
D) increase its current consumption spending,then increase spending when income falls 
E) decrease its current consumption spending,then increase spending when income falls

Question 19

If incomes in the United States increase,other things equal,then U.S.

Accepted Answer

A) imports increase and exports remain constant 
B) exports increase and imports decrease 
C) imports decrease and exports decrease 
D) imports remain constant and exports increase 
E) net exports remain constant 
A) imports increase and exports remain constant 
B) exports increase and imports decrease 
C) imports decrease and exports decrease 
D) imports remain constant and exports increase 
E) net exports remain constant

Question 20

If income increases by $100 and $75 of the increase is spent (consumed),the MPS equals

Accepted Answer

A) 1/4 
B) 1/2 
C) 3/4 
D) 4/5 
E) 1 
A) 1/4 
B) 1/2 
C) 3/4 
D) 4/5 
E) 1

Exam 9: Aaggregate Expenditure and Aggregate Demand

Which of the following is true of the autonomous investment and saving functions?

Expectations that the price level will rise in the future cause consumption to rise today.

Although consumer spending has averaged about 90 percent of disposable income,in recent years the percentage of disposable income claimed by consumption has

An increase in the MPC will cause the consumption function to become steeper (rotate upwards).

Expectations that the price level will decrease in the future will

More of society's resources will be channeled into capital when

Exhibit 9-4 -Consider an economy with a consumption function like C1 in Exhibit 9-4.The economy is currently operating at A when interest rates go up.This would produce a movement from A to

If investment is autonomous,an increase in income will shift the investment function upward.

The opportunity cost of investing in capital is the interest rate.

Fluctuations in investment

When economists say investment is autonomous,they mean that investment is independent of the level of saving.

Actual investment will be larger than planned investment if there is an unintended inventory accumulation.

Sarah moves from Upperland,which has no taxes or transfer payments,to Lowerland,where she is hit with taxes of $2,000 and receives transfer payments of $3,000.She earns the same wage in both countries,but in Lowerland her disposable income is

The United States,with only one __________ of the world's population,accounts for about one __________ of the world's imports and one __________ of the world's exports.

The relationship between consumption and income is

Historically,consumption spending in the United States has

Which is true of disposable income?

A household that expects a decrease in disposable income in the future will

If incomes in the United States increase,other things equal,then U.S.

If income increases by $100 and $75 of the increase is spent (consumed),the MPS equals

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Baggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

Externalities and the Environment

International Finance

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

Filters

Exhibit 9-4 -Consider an economy with a consumption function like C₁ in Exhibit 9-4.The economy is currently operating at A when interest rates go up.This would produce a movement from A to

The United States,with only one of the world's population,accounts for about one of the world's imports and one __ of the world's exports.