Question 1

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

Accepted Answer

A)   Business pessimism about future economic conditions
B)   Limited available productive capacity
C)   An increase in the interest rate
D)   A decrease in business taxes

Question 2

Investment is not affected by current profits; it is affected by expected future profits only.

Accepted Answer

A) True 
 B)False

Question 3

2 to A3 because of a change in taxes, then in figure (B)  line: A)  B2 will shift to B3 B)  B1 will shift to B2 C)  B2 will shift to B1 D)  B3 will shift to B2" class="answers-bank-image d-inline" rel="preload" > Refer to the above figures with consumption schedules in figure (A)  and saving schedules in figure (B) , which correspond to each other across different levels of disposable income. If, in figure (A) , consumption shifts from A2 to A3 because of a change in taxes, then in figure (B)  line:

Accepted Answer

A)   B2 will shift to B3
B)   B1 will shift to B2
C)   B2 will shift to B1
D)   B3 will shift to B2

Question 4

The fraction, or percentage, of total income which is consumed is called the:

Accepted Answer

A)   Break-even income
B)   Consumption schedule
C)   Marginal propensity to consume
D)   Average propensity to consume

Question 5

What is the slope of the consumption schedule or consumption line for a given economy?

Accepted Answer

A)   APC
B)   APS
C)   1 - MPC
D)   1 - MPS

Question 6

The consumption schedule shows the relationship of household consumption to the level of:

Accepted Answer

A)   Saving
B)   Investment
C)   Disposable income
D)   The marginal propensity to consume

Question 7

According to the cumulative investment table above:

Accepted Answer

A)   $150 billion worth of investments have expected rates of return exactly equal to 20%
B)   $150 billion worth of investments have expected rates of return of 20% or lower
C)   $40 billion worth of investments have expected rates of return between 20% and 22%
D)   $260 billion worth of investments have expected rates of return higher than 20%

Question 8

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

Accepted Answer

A)   Equal to level 2
B)   Less than level 2
C)   Greater than level 2
D)   Equal to level 3

Question 9

An increase in household wealth that creates a wealth effect would shift the:

Accepted Answer

A)   Consumption schedule and the saving schedule upward
B)   Consumption schedule and the saving schedule downward
C)   Consumption schedule upward and the saving schedule downward
D)   Consumption schedule downward and the saving schedule upward

Question 10

Refer to the consumption schedule above. At income level 1, the amount of saving is:

Accepted Answer

A)   Positive
B)   Negative
C)   Zero
D)   Not measurable

Question 11

If households do not spend any extra income they receive but instead save the entire extra amount, then the multiplier will be zero.

Accepted Answer

A) True 
 B)False

Question 12

The multiplier effect magnifies the effect of a decrease in spending, resulting in a bigger decrease in real GDP.

Accepted Answer

A) True 
 B)False

Question 13

When the consumption schedule is plotted on a graph:

Accepted Answer

A)   Consumption is on the horizontal axis and saving is on the vertical axis
B)   Consumption is on the vertical axis and saving is on the horizontal axis
C)   Consumption is on the horizontal axis and disposable income is on the vertical axis
D)   Consumption is on the vertical axis and disposable income is on the horizontal axis

Question 14

The multiplier will be larger, the steeper is the saving schedule.

Accepted Answer

A) True 
 B)False

Question 15

If the consumption schedule becomes steeper, then the saving schedule will become steeper also.

Accepted Answer

A) True 
 B)False

Question 16

If the real interest rate increases:

Accepted Answer

A)   The investment demand curve will shift to the right
B)   The investment demand curve will shift to the left
C)   There will be a movement upward along the investment demand curve
D)   There will be a movement downward along the investment demand curve

Question 17

Refer to the consumption schedule above. If disposable income were $34,000, then the average propensity to save would be about:

Accepted Answer

A)   .75
B)   .88
C)   .25
D)   .12

Question 18

Which of the following factors would decrease investment demand?

Accepted Answer

A)   A decrease in business taxes
B)   An increase in the cost of acquiring capital goods
C)   An increase in the rate of technological change
D)   A decrease in the stock of capital goods on hand

Question 19

If disposable income increases from $912 to $927 billion and MPC = 0.6, then consumption will increase by:

Accepted Answer

A)   $6 billion
B)   $9 billion
C)   $54 billion
D)   $56 billion

Question 20

A change in the amount saved due to a change in income is represented by a:

Accepted Answer

A)   Shift of the entire saving schedule
B)   Movement along the saving schedule
C)   Change in the marginal propensity to save
D)   Change in the marginal propensity to consume

Exam 10: Basic Macroeconomic Relationships

The consumption schedule shows the relationship of household consumption to the level of:

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The multiplier will be larger, the steeper is the saving schedule.

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Refer to the consumption schedule above. If disposable income were $34,000, then the average propensity to save would be about:

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The multiplier effect magnifies the effect of a decrease in spending, resulting in a bigger decrease in real GDP.

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An increase in household wealth that creates a wealth effect would shift the:

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

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

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What is the slope of the consumption schedule or consumption line for a given economy?

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The fraction, or percentage, of total income which is consumed is called the:

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Which of the following factors would decrease investment demand?

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If the consumption schedule becomes steeper, then the saving schedule will become steeper also.

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When the consumption schedule is plotted on a graph:

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Investment is not affected by current profits; it is affected by expected future profits only.

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If disposable income increases from $912 to $927 billion and MPC = 0.6, then consumption will increase by:

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Refer to the consumption schedule above. At income level 1, the amount of saving is:

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According to the cumulative investment table above:

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Refer to the above figures with consumption schedules in figure (A) and saving schedules in figure (B) , which correspond to each other across different levels of disposable income. If, in figure (A) , consumption shifts from A2 to A3 because of a change in taxes, then in figure (B) line:

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If households do not spend any extra income they receive but instead save the entire extra amount, then the multiplier will be zero.

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If the real interest rate increases:

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A change in the amount saved due to a change in income is represented by a:

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Refer to the above figures with consumption schedules in figure (A) and saving schedules in figure (B) , which correspond to each other across different levels of disposable income. If, in figure (A) , consumption shifts from A₂ to A₃ because of a change in taxes, then in figure (B) line:

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