Question 1

-Refer to the above figure. The figure represents the saving function for the consumer. Point B represents

Accepted Answer

A)  the amount of autonomous consumption. 
B)  a situation in which saving is positive. 
C)  a situation in which saving is negative. 
D)  the point at which saving equals zero. 
A)  the amount of autonomous consumption. 
B)  a situation in which saving is positive. 
C)  a situation in which saving is negative. 
D)  the point at which saving equals zero.

Question 2

In the graph for the consumption function, the 45-degree line

Accepted Answer

A)  contains only a consumption component. 
B)  represents both planned consumption and planned investment. 
C)  shows various combinations where planned consumption equals real disposable income. 
D)  reflects a decreasing APC as real disposable income rises. 
A)  contains only a consumption component. 
B)  represents both planned consumption and planned investment. 
C)  shows various combinations where planned consumption equals real disposable income. 
D)  reflects a decreasing APC as real disposable income rises.

Question 3

-Refer to the above figure. Saving occurs at

Accepted Answer

A)  only at point A. 
B)  to the left of point B. 
C)  only at point B. 
D)  to the right of point B. 
A)  only at point A. 
B)  to the left of point B. 
C)  only at point B. 
D)  to the right of point B.

Question 4

The relationship between planned consumption expenditures and the level of real disposable income is called

Accepted Answer

A)  the consumption function. 
B)  the savings function. 
C)  the investment function. 
D)  the aggregate demand function. 
A)  the consumption function. 
B)  the savings function. 
C)  the investment function. 
D)  the aggregate demand function.

Question 5

When a household's disposable income falls to zero, what do we expect will happen?

Accepted Answer

A)  The household's consumption spending also falls to zero. 
B)  The household will maintain a positive level of saving. 
C)  The household will maintain its previous level of consumption. 
D)  Consumption will fall to the level of autonomous consumption. 
A)  The household's consumption spending also falls to zero. 
B)  The household will maintain a positive level of saving. 
C)  The household will maintain its previous level of consumption. 
D)  Consumption will fall to the level of autonomous consumption.

Question 6

What happens as the interest rate rises?

Accepted Answer

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

Question 7

The Keynesian model is based on the idea that

Accepted Answer

A)  saving depends only on the interest rate. 
B)  both consumption and saving are positively related to real disposable income. 
C)  consumption is unrelated to the level of real Gross Domestic Product (GDP). 
D)  both consumption and saving are unrelated to the level of real Gross Domestic Product (GDP). 
A)  saving depends only on the interest rate. 
B)  both consumption and saving are positively related to real disposable income. 
C)  consumption is unrelated to the level of real Gross Domestic Product (GDP). 
D)  both consumption and saving are unrelated to the level of real Gross Domestic Product (GDP).

Question 8

-Refer to the above figure. Line BCD is called

Accepted Answer

A)  the saving function. 
B)  the savings function. 
C)  the 45-degree line. 
D)  the consumption function. 
A)  the saving function. 
B)  the savings function. 
C)  the 45-degree line. 
D)  the consumption function.

Question 9

Which one of the following is TRUE in an open economy with a government sector?

Accepted Answer

A)  The equilibrium level of real GDP occurs when real net export spending equals zero. 
B)  The equilibrium level of real GDP occurs when planned real saving equals government spending. 
C)  The equilibrium level of real GDP occurs when total planned real expenditures equal real GDP. 
D)  The equilibrium level of real GDP occurs when planned real investment spending is zero. 
A)  The equilibrium level of real GDP occurs when real net export spending equals zero. 
B)  The equilibrium level of real GDP occurs when planned real saving equals government spending. 
C)  The equilibrium level of real GDP occurs when total planned real expenditures equal real GDP. 
D)  The equilibrium level of real GDP occurs when planned real investment spending is zero.

Question 10

-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 $1400?

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 11

-Refer to the above figure. The figure represents the consumption function for a consumer. Point C represents

Accepted Answer

A)  autonomous consumption. 
B)  positive saving. 
C)  negative saving. 
D)  zero saving. 
A)  autonomous consumption. 
B)  positive saving. 
C)  negative saving. 
D)  zero saving.

Question 12

If the marginal propensity to save (MPS)decreases, the multiplier

Accepted Answer

A)  increases. 
B)  decreases. 
C)  stays the same. 
D)  can either increase or decrease, depending on what happens to the marginal propensity to consume (MP
C) . 
A)  increases. 
B)  decreases. 
C)  stays the same. 
D)  can either increase or decrease, depending on what happens to the marginal propensity to consume (MP
C) .

Question 13

What determines investment in the Keynesian framework? How is investment related to real Gross Domestic Product (GDP)?

Accepted Answer

Investment is determined by business peo

Question 14

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 15

Which of the following would increase the level of planned real investment?

Accepted Answer

A)  an increase in the interest rate 
B)  an expectation of higher future profits 
C)  an expectation of higher future costs 
D)  an increase in business taxes 
A)  an increase in the interest rate 
B)  an expectation of higher future profits 
C)  an expectation of higher future costs 
D)  an increase in business taxes

Question 16

A higher price level causes

Accepted Answer

A)  the aggregate demand curve to shift to the left. 
B)  the aggregate demand curve to shift to the right. 
C)  the C + I + G + X curve to shift down. 
D)  the C + I + G + X curve to shift up. 
A)  the aggregate demand curve to shift to the left. 
B)  the aggregate demand curve to shift to the right. 
C)  the C + I + G + X curve to shift down. 
D)  the C + I + G + X curve to shift up.

Question 17

In economics, the term "autonomous" means

Accepted Answer

A)  existing independently. 
B)  non-economic related. 
C)  disposable income. 
D)  excessive spending. 
A)  existing independently. 
B)  non-economic related. 
C)  disposable income. 
D)  excessive spending.

Question 18

Investment includes spending on

Accepted Answer

A)  capital goods, buildings, and consumer durable goods. 
B)  capital goods, buildings, and changes in business inventories. 
C)  capital goods, consumer durable goods, and changes in business inventories. 
D)  capital goods, buildings, and changes in business savings. 
A)  capital goods, buildings, and consumer durable goods. 
B)  capital goods, buildings, and changes in business inventories. 
C)  capital goods, consumer durable goods, and changes in business inventories. 
D)  capital goods, buildings, and changes in business savings.

Question 19

Because a decrease in real autonomous spending results in a ________ in the price level, the ultimate effect on real GDP is ________ than predicted by the multiplier.

Accepted Answer

A)  fall; smaller 
B)  fall; larger 
C)  rise; smaller 
D)  fall, smaller 
A)  fall; smaller 
B)  fall; larger 
C)  rise; smaller 
D)  fall, smaller

Question 20

If the marginal propensity to consume (MPC) is 0.75, what is the value of the multiplier?

Accepted Answer

A)  4.0 
B)  3.0 
C)  2.0 
D)  1.0 
A)  4.0 
B)  3.0 
C)  2.0 
D)  1.0

Exam 12: Consumption, Real GDP, and the Multiplier

-Refer to the above figure. The figure represents the saving function for the consumer. Point B represents

In the graph for the consumption function, the 45-degree line

-Refer to the above figure. Saving occurs at

The relationship between planned consumption expenditures and the level of real disposable income is called

When a household's disposable income falls to zero, what do we expect will happen?

What happens as the interest rate rises?

The Keynesian model is based on the idea that

-Refer to the above figure. Line BCD is called

Which one of the following is TRUE in an open economy with a government sector?

-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 $1400?

-Refer to the above figure. The figure represents the consumption function for a consumer. Point C represents

If the marginal propensity to save (MPS)decreases, the multiplier

What determines investment in the Keynesian framework? How is investment related to real Gross Domestic Product (GDP)?

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

Which of the following would increase the level of planned real investment?

A higher price level causes

In economics, the term "autonomous" means

Investment includes spending on

Because a decrease in real autonomous spending results in a ________ in the price level, the ultimate effect on real GDP is ________ than predicted by the multiplier.

If the marginal propensity to consume (MPC) is 0.75, what is the value of the multiplier?

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

Because a decrease in real autonomous spending results in a in the price level, the ultimate effect on real GDP is than predicted by the multiplier.