Question 1

The wealth effect will tend to decrease consumption and increase saving.

Accepted Answer

A) True 
 B)False

Question 2

If the saving schedule is a straight line, the:

Accepted Answer

A)  MPS must be constant.
B)  APS must be constant.
C)  APC must be constant.
D)  MPC must be rising.

Question 3

Refer to the above diagram.The equation for the saving schedule is:

Accepted Answer

A)  S = .6Y.
B)  Y = 60 + .6S.
C)  S = 60 + .4Y.
D)  S = -60 + .4Y.

Question 4

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.  Refer to the above data.The marginal propensity to consume:

Accepted Answer

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

Question 5

Which one of the following will cause a movement down along an economy's consumption schedule?

Accepted Answer

A)  an increase in stock prices
B)  a decrease in stock prices
C)  an increase in consumer indebtedness
D)  a decrease in disposable income

Question 6

The investment-demand curve will shift to the right as the result of:

Accepted Answer

A)  the availability of excess productive capacity.
B)  an increase in business taxes.
C)  businesses becoming more optimistic with respect to future business conditions.
D)  an increase in the real interest rate.

Question 7

The simple multiplier may be calculated as:

Accepted Answer

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

Question 8

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.

Question 9

The consumption schedule relates:

Accepted Answer

A)  consumption to the level of disposable income.
B)  saving to the level of disposable income.
C)  disposable income to domestic income.
D)  consumption to saving.

Question 10

The equation C = 35 + .75Y, where C is consumption and Y is disposable income, tells us that:

Accepted Answer

A)  households will consume three-fourths of whatever level of disposable income they receive.
B)  households will consume $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive.
C)  there is an inverse relationship between disposable income and consumption.
D)  households will save $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive.

Question 11

The simple multiplier is:

Accepted Answer

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

Question 12

Other things equal, a 10 percent decrease in corporate income taxes will:

Accepted Answer

A)  decrease the market price of real capital goods.
B)  have no effect on the location of the investment-demand curve.
C)  shift the investment-demand curve to the right.
D)  shift the investment-demand curve to the left.

Question 13

Economists disagree on the actual size of the multiplier.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is correct?

Accepted Answer

A)  MPC + MPS = APC + APS
B)  APC + MPS = APS + MPC
C)  APC + MPC = APS + MPS
D)  APC - APS = MPC - MPS

Question 15

Suppose that the level of GDP increased by $100 billion in an economy where the marginal propensity to consume is 0.5.The initial change in spending must have been:

Accepted Answer

A)  $100 billion.
B)  $50 billion.
C)  $500 billion.
D)  $5 billion.

Question 16

3 only. C) C3 and C4 only. D) C1 and C2 only." class="answers-bank-image d-inline" rel="preload" > Refer to the above diagram.The MPC and APC are both constant as income increases for:

Accepted Answer

A)  none of the consumption schedules shown.
B)  C3 only.
C)  C3 and C4 only.
D)  C1 and C2 only.

Question 17

The investment-demand curve will shift to the left:

Accepted Answer

A)  if firms plan to increase their inventories.
B)  if firms plan to decrease their inventories.
C)  if firms expect an increase in their sales.
D)  if firms expect no change in their sales.

Question 18

The multiplier:

Accepted Answer

A)  varies directly with the slope of the investment-demand schedule.
B)  is unrelated to the slope of the saving schedule.
C)  will be greater, the smaller the slope of the saving schedule.
D)  will be greater, the steeper the slope of the saving schedule.

Question 19

Assume that for the entire business sector of the economy there is $0 worth of investment projects which will yield an expected rate of return of 25 percent or more.But there are $15 worth of investments which will yield an expected rate of return of 20-25 percent; another $15 with an expected rate of return of 15-20 percent; and similarly an additional $15 of investment projects in each successive rate of return range down to and including the 0-5 percent range.Refer to the above information.If the real interest rate is 15 percent, what amount of investment will be undertaken?

Accepted Answer

A)  $15
B)  $30
C)  $45
D)  $60

Question 20

With an MPS of .4, the MPC will be:

Accepted Answer

A)  1.0 minus .4.
B)  .4 minus 1.0.
C)  the reciprocal of the MPS.
D)  .4.

Exam 10: B: Basic Macroeconomic Relationships

The equation C = 35 + .75Y, where C is consumption and Y is disposable income, tells us that:

Correct Answer
verified

If the saving schedule is a straight line, the:

Correct Answer
verified

The simple multiplier is:

Correct Answer
verified

The wealth effect will tend to decrease consumption and increase saving.

Correct Answer
verified

Refer to the above diagram.The MPC and APC are both constant as income increases for:

Correct Answer
verified

The consumption schedule relates:

Correct Answer
verified

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

Correct Answer
verified

The multiplier:

Correct Answer
verified

The investment-demand curve will shift to the left:

Correct Answer
verified

Correct Answer
verified

Suppose that the level of GDP increased by $100 billion in an economy where the marginal propensity to consume is 0.5.The initial change in spending must have been:

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

Which one of the following will cause a movement down along an economy's consumption schedule?

Correct Answer
verified

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the above data.The marginal propensity to consume:

Correct Answer
verified

Refer to the above diagram.The equation for the saving schedule is:

Correct Answer
verified

Economists disagree on the actual size of the multiplier.

Correct Answer
verified

The investment-demand curve will shift to the right as the result of:

Correct Answer
verified

With an MPS of .4, the MPC will be:

Correct Answer
verified

Other things equal, a 10 percent decrease in corporate income taxes will:

Correct Answer
verified

The simple multiplier may be calculated as:

Correct Answer
verified

Exam 10: B: Basic Macroeconomic Relationships

The equation C = 35 + .75Y, where C is consumption and Y is disposable income, tells us that:

Correct AnswerverifiedShow Answer

If the saving schedule is a straight line, the:

Correct AnswerverifiedShow Answer

The simple multiplier is:

Correct AnswerverifiedShow Answer

The wealth effect will tend to decrease consumption and increase saving.

Correct AnswerverifiedShow Answer

Refer to the above diagram.The MPC and APC are both constant as income increases for:

Correct AnswerverifiedShow Answer

The consumption schedule relates:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The multiplier:

Correct AnswerverifiedShow Answer

The investment-demand curve will shift to the left:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that the level of GDP increased by $100 billion in an economy where the marginal propensity to consume is 0.5.The initial change in spending must have been:

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Which one of the following will cause a movement down along an economy's consumption schedule?

Correct AnswerverifiedShow Answer

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the above data.The marginal propensity to consume:

Correct AnswerverifiedShow Answer

Refer to the above diagram.The equation for the saving schedule is:

Correct AnswerverifiedShow Answer

Economists disagree on the actual size of the multiplier.

Correct AnswerverifiedShow Answer

The investment-demand curve will shift to the right as the result of:

Correct AnswerverifiedShow Answer

With an MPS of .4, the MPC will be:

Correct AnswerverifiedShow Answer

Other things equal, a 10 percent decrease in corporate income taxes will:

Correct AnswerverifiedShow Answer

The simple multiplier may be calculated as:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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