Question 1

In the Keynesian model, a decrease in real autonomous spending results in a more than proportional decrease in real Gross Domestic Product (GDP)  because

Accepted Answer

A)   consumption decreases as a result of lower real disposable income.
B)   consumption increases while real disposable income decreases.
C)   real autonomous spending decreases further as real disposable income decreases.
D)   government spending also decreases.

Question 2

The marginal propensity to save (MPS)  is

Accepted Answer

A)   the rate at which real savings changes over time.
B)   the percentage of real disposable income saved.
C)   the difference between the amounts of real disposable income consumed and saved.
D)   the percentage of an additional dollar of real disposable income that will go toward additional real savings.

Question 3

The difference between a stock and a flow is

Accepted Answer

A)   a stock is something measured at one point in time while a flow is something that is expressed per unit of time.
B)   a stock is something measured at one point in time while a flow is something that is fixed.
C)   a stock is expressed per unit of time while a flow is measured at one point in time.
D)   a stock refers to the solid inventory firms have on hand while a flow refers to the liquid inventory firms have on hand.

Question 4

According to Keynes, the primary determinant of a person's saving is NOT

Accepted Answer

A)   the person's level of income but the desired real income of the person.
B)   the person's level of savings but the expected interest rate in the near future.
C)   the interest rate but the level of savings the person has.
D)   the interest rate but the level of the person's real disposable income.

Question 5

Consumption goods are

Accepted Answer

A)   a form of investment.
B)   goods purchased from savings.
C)   a form of capital goods.
D)   goods purchased by households for immediate use.

Question 6

Suppose that when disposable income increases by $2,000, consumption spending increases by $1,500. Given this information, we know that the marginal propensity to consume (MPC)  is

Accepted Answer

A)   0.25.
B)   0.75.
C)   1.33.
D)   4.

Question 7

Average propensity to consume

Accepted Answer

A)   is the same as the break-even point.
B)   gives the amount a person changes planned consumption for a change in real disposable income.
C)   is the amount of consumption that is independent of the level of disposable income.
D)   is the proportion of total disposable income that is consumed.

Question 8

Autonomous consumption is defined as

Accepted Answer

A)   the level of real consumption spending that is independent of real disposable income.
B)   the real consumption spending by the autonomous government.
C)   the level of real consumption spending that is equal to real disposable income.
D)   the consumption of foreign-made goods independent of exchange rates.

Question 9

Investment is

Accepted Answer

A)   the purchasing of stocks and mutual funds.
B)   spending by consumers on items that account for large shares of their budgets.
C)   spending by businesses on things which can be used to produce goods and services in the future.
D)   the production of goods for immediate satisfaction.

Question 10

Consumption goods

Accepted Answer

A)   include goods such as CDs that a music store holds in inventory.
B)   are only the goods bought by households for immediate satisfaction.
C)   include spending on machines and buildings so that goods can be produced in the future.
D)   are goods that are used to make other goods.

Question 11

Autonomous consumption is the level of consumption that is

Accepted Answer

A)   consistent with the average standard of living.
B)   observed at the poverty line.
C)   independent of real income.
D)   available to someone earning the minimum wage.

Question 12

According to Keynes, real saving and real consumption spending are functions of

Accepted Answer

A)   economic expectations.
B)   an individual's future earning potential.
C)   current educational attainment.
D)   current real disposable income.

Question 13

Autonomous consumption

Accepted Answer

A)   is the same as the break-even point.
B)   gives the amount a person changes planned consumption for a change in real disposable income.
C)   is the amount of consumption that does not depend on the level of disposable income.
D)   is the amount total disposable income less planned consumption.

Question 14

Suppose when real disposable income is $5000, planned real consumption is $4000. When real disposable income increases to $6000, planned real saving increases by $500. The new planned real consumption expenditures is

Accepted Answer

A)   $5,000.
B)   $4,500.
C)   $6,000.
D)   $3,500.

Question 15

-Refer to the above figure. If real disposable income is $30,000, saving is

Accepted Answer

A)   $0.
B)   $4000.
C)   $5000.
D)   $6000.

Question 16

If your real disposable income goes up by $200 per week, and your real consumption spending goes up by $160 per week, you have an marginal propensity to save of

Accepted Answer

A)   0.2.
B)   0.8.
C)   1.2.
D)   1.0.

Question 17

In the Keynesian model, whenever planned investment is greater 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 GDP will eventually increase.
D)   there will be an unplanned inventory increase, and GDP will eventually decrease.

Question 18

-Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. The break-even level of real disposable income is

Accepted Answer

A)   0.
B)   6000.
C)   1000.
D)   1400.

Question 19

-Refer to the above figure. Point B

Accepted Answer

A)   equals autonomous consumption.
B)   equals autonomous consumption plus planned investment plus autonomous government spending plus autonomous net exports.
C)   has no special significance.
D)   equals government expenditures.

Question 20

The part of consumption that does NOT depend upon the level of disposable income is

Accepted Answer

A)   autonomous consumption.
B)   saving.
C)   savings.
D)   average propensity to consume.

Exam 12: Consumption, Real GDP, and the Multiplier

Consumption goods

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-Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. The break-even level of real disposable income is

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Average propensity to consume

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Suppose when real disposable income is $5000, planned real consumption is $4000. When real disposable income increases to $6000, planned real saving increases by $500. The new planned real consumption expenditures is

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Suppose that when disposable income increases by $2,000, consumption spending increases by $1,500. Given this information, we know that the marginal propensity to consume (MPC) is

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-Refer to the above figure. If real disposable income is $30,000, saving is

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Autonomous consumption is defined as

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Autonomous consumption is the level of consumption that is

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The marginal propensity to save (MPS) is

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The difference between a stock and a flow is

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Consumption goods are

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-Refer to the above figure. Point B

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In the Keynesian model, whenever planned investment is greater than planned saving

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Investment is

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In the Keynesian model, a decrease in real autonomous spending results in a more than proportional decrease in real Gross Domestic Product (GDP) because

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According to Keynes, the primary determinant of a person's saving is NOT

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If your real disposable income goes up by $200 per week, and your real consumption spending goes up by $160 per week, you have an marginal propensity to save of

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The part of consumption that does NOT depend upon the level of disposable income is

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According to Keynes, real saving and real consumption spending are functions of

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Autonomous consumption

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