Question 1

The consumption function will shift downward when

Accepted Answer

A)  the rate of interest decreases. 
B)  household saving decreases. 
C)  real disposable income increases. 
D)  household wealth decreases. 
A)  the rate of interest decreases. 
B)  household saving decreases. 
C)  real disposable income increases. 
D)  household wealth decreases.

Question 2

Saving is a ________ concept and savings are a ________ concept.

Accepted Answer

A)  stock; stock 
B)  flow; flow 
C)  flow; stock 
D)  stock; flow 
A)  stock; stock 
B)  flow; flow 
C)  flow; stock 
D)  stock; flow

Question 3

According to the above table, the marginal propensity to consume is
-According to the above table, if real Gross Domestic Product (GDP) equals $30,000, planned saving equals

Accepted Answer

A)  $2,000. 
B)  $3,000. 
C)  $4,000. 
D)  $5,000. 
A)  $2,000. 
B)  $3,000. 
C)  $4,000. 
D)  $5,000.

Question 4

-In the above table, saving is positive when real disposable income is greater than

Accepted Answer

A)  zero. 
B)  $100. 
C)  $300. 
D)  $500. 
A)  zero. 
B)  $100. 
C)  $300. 
D)  $500.

Question 5

Suppose autonomous consumption increases. This increase in autonomous consumption will cause which of the following to occur?

Accepted Answer

A)  The consumption function shifts up. 
B)  The consumption function shifts down. 
C)  The consumption function becomes steeper. 
D)  The consumption function becomes less steep. 
A)  The consumption function shifts up. 
B)  The consumption function shifts down. 
C)  The consumption function becomes steeper. 
D)  The consumption function becomes less steep.

Question 6

-Refer to the above figure. The equilibrium level of real Gross Domestic Product (GDP) is

Accepted Answer

A)  $6 trillion. 
B)  $7 trillion. 
C)  $12 trillion. 
D)  $20 trillion. 
A)  $6 trillion. 
B)  $7 trillion. 
C)  $12 trillion. 
D)  $20 trillion.

Question 7

Which of the following is a TRUE statement relative to retained earnings and investment?

Accepted Answer

A)  Lower interest rates stimulate borrowing for investment, but have no effect on the use of retained earnings for investment spending. 
B)  Lower interest rates stimulate borrowing for investment, but discourage the use of retained earnings for investment. 
C)  Lower interest rates reduce the opportunity cost of retained earnings, stimulating the use of these funds in investment. 
D)  Lower interest rates have no effect on investment spending at all because investment spending is autonomous. 
A)  Lower interest rates stimulate borrowing for investment, but have no effect on the use of retained earnings for investment spending. 
B)  Lower interest rates stimulate borrowing for investment, but discourage the use of retained earnings for investment. 
C)  Lower interest rates reduce the opportunity cost of retained earnings, stimulating the use of these funds in investment. 
D)  Lower interest rates have no effect on investment spending at all because investment spending is autonomous.

Question 8

If real Gross Domestic Product (GDP) is at an equilibrium level in a closed economy,

Accepted Answer

A)  real GDP equals the sum of consumption, investment, and government purchases. 
B)  saving will be less than planned investment. 
C)  unplanned inventory accumulation will equal planned inventory accumulation. 
D)  real GDP equals the sum of consumption and investment minus government purchases. 
A)  real GDP equals the sum of consumption, investment, and government purchases. 
B)  saving will be less than planned investment. 
C)  unplanned inventory accumulation will equal planned inventory accumulation. 
D)  real GDP equals the sum of consumption and investment minus government purchases.

Question 9

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

Accepted Answer

A)  the income function. 
B)  the expenditure function. 
C)  the consumption function. 
D)  the autonomous spending function. 
A)  the income function. 
B)  the expenditure function. 
C)  the consumption function. 
D)  the autonomous spending function.

Question 10

Along a linear consumption function

Accepted Answer

A)  the average propensity to consume rises with a decrease in income. 
B)  the marginal propensity to consume rises with an increase in income. 
C)  the average propensity to consume rises with income, but the marginal propensity to consume falls with an increase in income. 
D)  both the average propensity to consume and the marginal propensity to consume rise with an increase in income. 
A)  the average propensity to consume rises with a decrease in income. 
B)  the marginal propensity to consume rises with an increase in income. 
C)  the average propensity to consume rises with income, but the marginal propensity to consume falls with an increase in income. 
D)  both the average propensity to consume and the marginal propensity to consume rise with an increase in income.

Question 11

The relationship between planned consumption and real disposable income is referred to as

Accepted Answer

A)  the wealth function. 
B)  the saving function. 
C)  the multiplier. 
D)  the consumption function. 
A)  the wealth function. 
B)  the saving function. 
C)  the multiplier. 
D)  the consumption function.

Question 12

When real GDP is in equilibrium with no government and no international trade

Accepted Answer

A)  real planned investment spending equals real planned saving. 
B)  real planned investment equals real planned consumption spending. 
C)  unplanned inventories are increasing. 
D)  unplanned inventories are decreasing. 
A)  real planned investment spending equals real planned saving. 
B)  real planned investment equals real planned consumption spending. 
C)  unplanned inventories are increasing. 
D)  unplanned inventories are decreasing.

Question 13

In the above figure, when real disposable income is less than 600, then

Accepted Answer

A)  consumption is less than disposable income. 
B)  consumption is more than disposable income. 
C)  consumption is the same as disposable income. 
D)  the MPC will fall. 
A)  consumption is less than disposable income. 
B)  consumption is more than disposable income. 
C)  consumption is the same as disposable income. 
D)  the MPC will fall.

Question 14

Which of the following is a simplifying assumption associated with the short-run Keynesian model of equilibrium real Gross Domestic Product (GDP) determination?

Accepted Answer

A)  Gross private domestic investment exceeds net private domestic investment. 
B)  Most business profits are distributed to shareholders. 
C)  Businesses pay indirect taxes. 
D)  There is no depreciation. 
A)  Gross private domestic investment exceeds net private domestic investment. 
B)  Most business profits are distributed to shareholders. 
C)  Businesses pay indirect taxes. 
D)  There is no depreciation.

Question 15

If the average propensity to save (APS) is 0.70, then this means

Accepted Answer

A)  people are saving 70 percent of their disposable income. 
B)  people are spending 70 percent of their disposable income. 
C)  people are saving 70 percent of their amount of consumption. 
D)  people are spending 70 percent of their amount of saving. 
A)  people are saving 70 percent of their disposable income. 
B)  people are spending 70 percent of their disposable income. 
C)  people are saving 70 percent of their amount of consumption. 
D)  people are spending 70 percent of their amount of saving.

Question 16

-In the above figure, if real GDP is $1 trillion, there is

Accepted Answer

A)  dissaving. 
B)  positive saving. 
C)  negative investment. 
D)  negative consumption. 
A)  dissaving. 
B)  positive saving. 
C)  negative investment. 
D)  negative consumption.

Question 17

What can we say about APC + APS and MPC + MPS?

Accepted Answer

A)  Each must sum to 1. 
B)  MPC + MPS = 100% of total income. 
C)  APC + APS = 100% of the change in income. 
D)  MPC + MPS always equals 1, but the sum of APC + APS can vary. 
A)  Each must sum to 1. 
B)  MPC + MPS = 100% of total income. 
C)  APC + APS = 100% of the change in income. 
D)  MPC + MPS always equals 1, but the sum of APC + APS can vary.

Question 18

If the multiplier in the economy is 3, the marginal propensity to save (MPS) must be

Accepted Answer

A)  0.33. 
B)  0.67. 
C)  1. 
D)  3. 
A)  0.33. 
B)  0.67. 
C)  1. 
D)  3.

Question 19

The marginal propensity to consume is

Accepted Answer

A)  real consumption/real disposable income. 
B)  real saving/real disposable income. 
C)  change in real consumption/change in real disposable income. 
D)  change in real saving/change in real disposable income. 
A)  real consumption/real disposable income. 
B)  real saving/real disposable income. 
C)  change in real consumption/change in real disposable income. 
D)  change in real saving/change in real disposable income.

Question 20

In the above figure, when real disposable income equals 600

Accepted Answer

A)  there is dissaving. 
B)  consumption is less than disposable income. 
C)  real disposable income exceeds consumption. 
D)  consumption equals real disposable income. 
A)  there is dissaving. 
B)  consumption is less than disposable income. 
C)  real disposable income exceeds consumption. 
D)  consumption equals real disposable income.

Exam 12: Consumption, Real GDP, and the Multiplier

The consumption function will shift downward when

Saving is a ________ concept and savings are a ________ concept.

According to the above table, the marginal propensity to consume is -According to the above table, if real Gross Domestic Product (GDP) equals $30,000, planned saving equals

-In the above table, saving is positive when real disposable income is greater than

Suppose autonomous consumption increases. This increase in autonomous consumption will cause which of the following to occur?

-Refer to the above figure. The equilibrium level of real Gross Domestic Product (GDP) is

Which of the following is a TRUE statement relative to retained earnings and investment?

If real Gross Domestic Product (GDP) is at an equilibrium level in a closed economy,

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

Along a linear consumption function

The relationship between planned consumption and real disposable income is referred to as

When real GDP is in equilibrium with no government and no international trade

In the above figure, when real disposable income is less than 600, then

Which of the following is a simplifying assumption associated with the short-run Keynesian model of equilibrium real Gross Domestic Product (GDP) determination?

If the average propensity to save (APS) is 0.70, then this means

-In the above figure, if real GDP is $1 trillion, there is

What can we say about APC + APS and MPC + MPS?

If the multiplier in the economy is 3, the marginal propensity to save (MPS) must be

The marginal propensity to consume is

In the above figure, when real disposable income equals 600

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

Saving is a concept and savings are a concept.