Question 1

-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 marginal propensity to consume?

Accepted Answer

A) 0 
B) 0.3 
C) 0.7 
D) 1

Question 2

Technological progress should lead to

Accepted Answer

A) an outward (rightward)shift in the investment function. 
B) a downward movement of the investment function. 
C) an unchanged investment function. 
D) less saving.

Question 3

-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 save when real disposable income equals $4,000?

Accepted Answer

A) -0.45 
B) 0.69 
C) 0.7 
D) 1.45

Question 4

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.

Question 5

Ignoring the government and foreign sectors, if planned investment spending is $500 billion, planned saving is $800 billion, and real Gross Domestic Product (GDP)is $13 trillion, then unplanned inventories will

Accepted Answer

A) decrease $300 billion. 
B) increase $300 billion. 
C) increase $800 billion. 
D) not change.

Question 6

In the Keynesian model with government and the foreign sector added, what are the components of spending?
 Which of these components are autonomous and which are not?
 How is the equilibrium found?
 When the economy is not at an equilibrium, what adjustments are made?

Accepted Answer

The answer of In the Keynesian model with government and...

Question 7

-In the above table, the marginal propensity to consume when disposable income changes from $5,000 to $6,000 is

Accepted Answer

A) 0.8. 
B) 0.75. 
C) 0.6. 
D) 0.5.

Question 8

What effect would taxation have on real consumption spending when government spending is autonomous?

Accepted Answer

A) Taxation reduces real consumption spending. 
B) Taxation increases real consumption spending. 
C) Taxation causes both real consumption spending and planned real saving to increase. 
D) None of the above is correct.

Question 9

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.

Question 10

Which of the following is TRUE?

Accepted Answer

A) MPC - MPS = 1 
B) MPC + MPS = 1 
C) MPC * MPS = 1 
D) MPC / MPS = 1

Question 11

The stock of assets owned by a person, household, firm or nation is

Accepted Answer

A) real disposable income. 
B) wealth. 
C) capital investment. 
D) capital goods.

Question 12

If that the marginal propensity to save (MPS)increased from 0.20 to 0.25, this would cause the multiplier effect to

Accepted Answer

A) decrease. 
B) increase. 
C) stay the same. 
D) None of the above is correct.

Question 13

-According to the above figure, autonomous consumption equals

Accepted Answer

A) $0. 
B) $5,000. 
C) $20,000. 
D) -$5,000.

Question 14

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.

Question 15

Assuming that Yd = $20,000 and C = $22,000, we would find that the average propensity to consume would be equal to

Accepted Answer

A) 0.9. 
B) 1.1. 
C) 1.8. 
D) 0.8.

Question 16

If the marginal propensity to consume (MPC)is 0.75 and there is an increase in planned investment spending of $0.5 trillion, then saving will

Accepted Answer

A) increase by $0.25 trillion. 
B) increase by $0.5 trillion. 
C) increase by $1 trillion. 
D) remain unchanged.

Question 17

According to the Keynesian model, what are the two components of consumption spending?
 What determines how consumption changes when real disposable income changes?
 Explain.

Accepted Answer

The answer of According to the Keynesian model, what are...

Question 18

Which of the following does NOT occur when the economy is operating at the equilibrium level of GDP?

Accepted Answer

A) Total planned expenditures equal real GDP. 
B) Real GDP tends to rise over time. 
C) Planned investment equals actual investment. 
D) Inventory investment equals zero.

Question 19

If, at some level of output, total planned real expenditures are less than real Gross Domestic Product (GDP)

Accepted Answer

A) real GDP will rise. 
B) real GDP remains unchanged. 
C) real GDP will either fall or remain unchanged, depending on the MPC. 
D) unplanned inventories will increase and real GDP will fall.

Question 20

If the MPS is one-third, a $100 increase in net exports will

Accepted Answer

A) reduce real Gross Domestic Product (GDP)by $100. 
B) reduce real Gross Domestic Product (GDP)by $300. 
C) increase real Gross Domestic Product (GDP)by $33. 
D) increase real Gross Domestic Product (GDP)by $300.

Exam 11: Consumption, Real GDP, and the Multiplier