Question 1

A $1 billion increase in investment will cause a:

Accepted Answer

A)   (1/MPS)  billion increase in equilibrium GDP.
B)   (MPS)  billion increase in equilibrium GDP.
C)   (1 - MP
C)   billion increase in equilibrium GDP.
D)   (MPC - MPS)  billion increase in equilibrium GDP.

Question 2

Assume that for the entire business sector of a private closed 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.  Which of the lines on the above diagram represents these data?

Accepted Answer

A)   A
B)   B
C)   C
D)   D

Question 3

Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by:

Accepted Answer

A)   $3 billion.
B)   $2/3 billion.
C)   $2 billion.
D)   $6 billion. D

Question 4

If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round, the multiplier in the economy is:

Accepted Answer

A)   2.
B)   3.33.
C)   5.
D)   10.

Question 5

The most important determinant of consumption and saving is the:

Accepted Answer

A)   level of bank credit.
B)   level of disposable income.
C)   interest rate.
D)   price level.

Question 6

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 7

Which of the following equations represents the saving schedule implicit in the data below? d B)  S = 40 + .4Yd C)  S = 40 + .6Yd D)  S = -40 + .4Yd" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   S = C - Yd
B)   S = 40 + .4Yd
C)   S = 40 + .6Yd
D)   S = -40 + .4Yd D

Question 8

The simple multiplier is:

Accepted Answer

A)   1/APS.
B)   1/APC.
C)   1/MPC.
D)   1/MPS.

Question 9

-The above figure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the largest multiplier?

Accepted Answer

A)   1
B)   2
C)   3
D)   4

Question 10

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:

Accepted Answer

A)   4.
B)   5.
C)   3.33.
D)   2.5. B

Question 11

Firms make planned changes to their inventories:

Accepted Answer

A)   if they are expecting either faster or slower sales.
B)   if they are expecting a faster sale.
C)   if they are expecting a slower sale.
D)   if they are expecting a decrease in labor costs.

Question 12

The slope of the consumption schedule is equal to the marginal propensity to consume.

Accepted Answer

A) True 
 B)False

Question 13

The real interest rate is:

Accepted Answer

A)   the percentage increase in money that the lender receives on a loan.
B)   the nominal rate less the rate of inflation .
C)   also called the after-tax interest rate.
D)   usually higher than the nominal interest rate.

Question 14

If the MPC is .8 and the disposable income is $200, then

Accepted Answer

A)   consumption and saving cannot be determined from the information given.
B)   saving will be $20.
C)   personal consumption expenditures will be $80.
D)   saving will be $40.

Question 15

-Refer to the above diagram. The marginal propensity to consume is equal to:

Accepted Answer

A)   AE/0E.
B)   CB/AB.
C)   CF/CD.
D)   CD/CF.

Question 16

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.

Question 17

The increase in income which results from an increase in investment spending would be greater the:

Accepted Answer

A)   smaller the MPS.
B)   smaller the APC.
C)   larger the MPS.
D)   smaller the MPC.

Question 18

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. At an income level of $400 billion, the average propensity to save in economy (2)  is:

Accepted Answer

A)   .9125.
B)   .0725.
C)   .0875.
D)   .9305.

Question 19

If the MPS is only half as large as the MPC, the multiplier:

Accepted Answer

A)   is 2.
B)   is 3.
C)   is 4.
D)   cannot be determined from the information given.

Question 20

If a consumption schedule shifts upward, this means that the:

Accepted Answer

A)   MPC has increased.
B)   MPS has decreased.
C)   APC is now higher at each level of disposable income.
D)   APC is now lower at each level of disposable income.

Exam 8: Basic Macroeconomic Relationships

A $1 billion increase in investment will cause a:

Correct Answer
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Correct Answer
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Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by:

Correct Answer
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D

If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round, the multiplier in the economy is:

Correct Answer
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The most important determinant of consumption and saving is the:

Correct Answer
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The simple multiplier may be calculated as:

Correct Answer
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Which of the following equations represents the saving schedule implicit in the data below?

Correct Answer
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D

The simple multiplier is:

Correct Answer
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-The above figure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the largest multiplier?

Correct Answer
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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:

Correct Answer
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B

Firms make planned changes to their inventories:

Correct Answer
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The slope of the consumption schedule is equal to the marginal propensity to consume.

Correct Answer
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The real interest rate is:

Correct Answer
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If the MPC is .8 and the disposable income is $200, then

Correct Answer
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-Refer to the above diagram. The marginal propensity to consume is equal to:

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

Correct Answer
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The increase in income which results from an increase in investment spending would be greater the:

Correct Answer
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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. At an income level of $400 billion, the average propensity to save in economy (2) is:

Correct Answer
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If the MPS is only half as large as the MPC, the multiplier:

Correct Answer
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If a consumption schedule shifts upward, this means that the:

Correct Answer
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Exam 8: Basic Macroeconomic Relationships

A $1 billion increase in investment will cause a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by:

Correct AnswerverifiedD

If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round, the multiplier in the economy is:

Correct AnswerverifiedShow Answer

The most important determinant of consumption and saving is the:

Correct AnswerverifiedShow Answer

The simple multiplier may be calculated as:

Correct AnswerverifiedShow Answer

Which of the following equations represents the saving schedule implicit in the data below?

Correct AnswerverifiedD

The simple multiplier is:

Correct AnswerverifiedShow Answer

-The above figure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the largest multiplier?

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedB

Firms make planned changes to their inventories:

Correct AnswerverifiedShow Answer

The slope of the consumption schedule is equal to the marginal propensity to consume.

Correct AnswerverifiedShow Answer

The real interest rate is:

Correct AnswerverifiedShow Answer

If the MPC is .8 and the disposable income is $200, then

Correct AnswerverifiedShow Answer

-Refer to the above diagram. The marginal propensity to consume is equal to:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The increase in income which results from an increase in investment spending would be greater the:

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. At an income level of $400 billion, the average propensity to save in economy (2) is:

Correct AnswerverifiedShow Answer

If the MPS is only half as large as the MPC, the multiplier:

Correct AnswerverifiedShow Answer

If a consumption schedule shifts upward, this means that the:

Correct AnswerverifiedShow Answer

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D

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D

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B

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