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Exam 10: Basic Macroeconomic Relationships

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Question 61

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Refer to the given saving schedule. Dissaving occurs when disposable income is

A) equal to level 2.
B) less than level 2.
C) greater than level 2.
D) equal to level 3.

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Question 62

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Refer to the given graph. A movement from a to b along C1 might be caused by a(n)

A) recession.
B) wealth effect of an increase in stock market prices.
C) increase in income tax rates.
D) increase in real GDP.

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Question 63

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If the MPC is 0.6, the multiplier will be

If disposable income is $900 billion when the average propensity to consume is 0.9, it can be concluded that

$\begin{array} { | c | c | } \hline \text { Disposable Income } & \text { Consumption } \\\hline \$ 200 & \$ 205 \\\hline 225 & 225 \\\hline 250 & 245 \\\hline 275 & 265 \\\hline 300 & 285 \\\hline\end{array}$ Refer to the given data. At the $200 level of disposable income,

$\begin{array} { | c | c | } \hline \text { Disposable Income } \left( Y _ { d } \right) & \text { Consumption (C) } \\\hline \$ 0 & \$ 40 \\\hline 100 & 100 \\\hline 200 & 160 \\\hline 300 & 220 \\\hline 400 & 280 \\\hline\end{array}$ (Advanced analysis) Which of the following equations correctly represents the given data?

One can determine the amount of any level of total income that is consumed by

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

Which of the following is correct?

1 + MPS = MPC.

$\begin{array} { | l | c | c | c | } \hline & \text { Change in Income } & \begin{array} { c } \text { Change in } \\\text { Consumption }\end{array} & \text { Change in Saving } \\\hline \text { Assumed Increase in Investment } & \$ 20 & \$ & \$ 4.00 \\\hline \text { Second Round } & \$ & \$ 12.80 & \$ \\\hline \text { All Other Rounds } & \$ & \$ 51.20 & \$ \\\hline \text { Totals } & \$ & \$ & \$ 20.00 \\\hline\end{array}$ Refer to the given table, which illustrates the multiplier process. The change in income in round two will be

The multiplier effect indicates that

Assume there are no prospective investment projects (I) that will yield an expected rate of return (r) of 25 percent or more, but there are $5 billion of investment opportunities with an expected rate of Return between 20 and 25 percent, an additional $5 billion between 15 and 20 percent, and so on. If The real interest rate is 15 percent in this economy, the aggregate amount of investment will be

Refer to the consumption schedule shown in the graph. Disposable income equals consumption at point

Which of the following relations is not correct?

Suppose an economy's consumption schedule shifts from C1 to C2, as shown in the diagram. We can say that its

The saving schedule shown in the diagram would shift downward if, all else equal,

Refer to the diagram. The break-even level of income is

If a $200 billion increase in investment spending creates $200 billion of new income in the first round of the multiplier process and $160 billion in the second round, the multiplier in the economy is

$\begin{array} { | c | c | } \hline \text { Disposable Income } & \text { Consumption } \\\hline \$ 0 & \$ 8 \\\hline 80 & 80 \\\hline 160 & 152 \\\hline 240 & 224 \\\hline 320 & 296 \\\hline 400 & 368 \\\hline\end{array}$ The disposable income (DI) and consumption (C) schedules are for a private, closed economy. All ?gures are in billions of dollars. If plotted on a graph, the slope of the consumption schedule would be