Question 1

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.E) C) and D)
F) A) and B)

Question 2

The relationship between the real interest rate and investment is shown by the:

Accepted Answer

A)  investment-demand schedule.
B)  consumption of fixed capital schedule.
C)  saving schedule.
D)  aggregate supply curve.E) All of the above
F) A) and B)

Question 3

A specific investment will be undertaken if the expected rate of returns, r, exceeds the interest rate, i.

Accepted Answer

A) True 
 B)False

Question 4

If Smith's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, it may be concluded that her marginal propensity to:

Accepted Answer

A)  save is three-fifths.
B)  consume is one-half.
C)  consume is three-fifths.
D)  consume is one-sixth.E) A) and B)
F) A) and C)

Question 5

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 data below.Suppose the consumption is increased by $2 billion in each of the three economies.This change could have been caused by:

Accepted Answer

A)  a decrease in consumer wealth.
B)  expectations of higher future income.
C)  an increase in taxation.
D)  an increase in saving.E) All of the above
F) B) and D)

Question 6

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

Accepted Answer

A)  the average propensity to save increased at each income level.
B)  the marginal propensity to save rose at each income level.
C)  consumer wealth rose rapidly because of a significant increase in stock market prices.
D)  the real interest rate increased.E) B) and D)
F) C) and D)

Question 7

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.The expected rate of return curve:

Accepted Answer

A)  shows a direct relationship between the interest rate and investment.
B)  is also the investment-demand curve.
C)  is indeterminate.
D)  cannot be calculated without knowing the level of saving.E) A) and B)
F) All of the above B

Question 8

Which of the following will not cause the consumption schedule to shift?

Accepted Answer

A)  a sharp increase in the amount of wealth held by households
B)  a change in consumer incomes
C)  the expectation of a recession
D)  a growing expectation that consumer durables will be in short supplyE) A) and D)
F) A) and B)

Question 9

The multiplier effect:

Accepted Answer

A)  reduces the MPC.
B)  magnifies small changes in spending into larger changes in output and income.
C)  promotes stability of the general price level.
D)  lessens upswings and downswings in business activity.E) C) and D)
F) B) and D)

Question 10

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.Suppose that consumption increased by $2 billion at each level of DI in each of the three countries.We can conclude that the:

Accepted Answer

A)  marginal propensity to consume will remain unchanged in each of the three countries.
B)  marginal propensity to consume will decline in each of the three countries.
C)  average propensity to save will fall at each level of DI in each of the three countries.
D)  marginal propensity to save will rise in each of the three countries.E) B) and C)
F) C) and D)

Question 11

The investment-demand curve suggests:

Accepted Answer

A)  that the amount invested will not be affected by changes in the real interest rate.
B)  an inverse relationship between the real rate of interest and the level of investment spending.
C)  that an increase in business taxes will tend to stimulate investment spending.
D)  a direct relationship between the real rate of interest and the level of investment spending.E) All of the above
F) B) and C)

Question 12

If for some reason households become increasingly thrifty, we could show this by:

Accepted Answer

A)  a downshift of the saving schedule.
B)  an upshift of the consumption schedule.
C)  an upshift of the saving schedule.
D)  an increase in the equilibrium GDP.E) A) and D)
F) A) and C)

Question 13

Refer to the above diagram.At disposable income level D, the average propensity to save is equal to:

Accepted Answer

A)  CD/BD.
B)  CD/0D.
C)  0D/CD.
D)  0A/0B.E) None of the above
F) All of the above B

Question 14

Which of the following is likely to be an effect of an increase in acquisition, maintenance, and operating costs on the investment demand curve of an economy?

Accepted Answer

A)  A leftward shift of the curve
B)  A rightward shift of the curve
C)  An upward movement along the curve
D)  A downward movement along the curveE) A) and C)
F) A) and B)

Question 15

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 + .4YdE) All of the above
F) C) and D)

Question 16

If the real interest rate in the economy is i and the expected rate of return from additional investment is r, then other things equal:

Accepted Answer

A)  more investment will be forthcoming when i exceeds r.
B)  less investment will be forthcoming when r rises.
C)  r will fall as more investment is undertaken.
D)  r will exceed i at all possible levels of investment.E) B) and D)
F) None of the above

Question 17

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.E) None of the above
F) All of the above

Question 18

Technological progress will:

Accepted Answer

A)  shift the investment schedule downward and increase the level of employment.
B)  shift the investment schedule downward and decrease the level of employment.
C)  increase unplanned investment in inventories.
D)  shift the investment schedule upward and increase the equilibrium level of GDP.E) None of the above
F) B) and C)

Question 19

If the net expected revenue from an investment is low, then the investment demand curve of an economy will:

Accepted Answer

A)  shift to the left.
B)  shift to the right.
C)  become vertical.
D)  become horizontal.E) C) and D)
F) A) and D) A

Question 20

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.E) All of the above
F) A) and C)

Exam 10: B: Basic Macroeconomic Relationships

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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The relationship between the real interest rate and investment is shown by the:

Correct Answer
verified

A specific investment will be undertaken if the expected rate of returns, r, exceeds the interest rate, i.

Correct Answer
verified

If Smith's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, it may be concluded that her marginal propensity to:

Correct Answer
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Correct Answer
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The saving schedule shown in the diagram below would shift downward if, all else equal:

Correct Answer
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Correct Answer
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B

Which of the following will not cause the consumption schedule to shift?

Correct Answer
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The multiplier effect:

Correct Answer
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The investment-demand curve suggests:

Correct Answer
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If for some reason households become increasingly thrifty, we could show this by:

Correct Answer
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Refer to the above diagram.At disposable income level D, the average propensity to save is equal to:

Correct Answer
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B

Which of the following is likely to be an effect of an increase in acquisition, maintenance, and operating costs on the investment demand curve of an economy?

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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If the real interest rate in the economy is i and the expected rate of return from additional investment is r, then other things equal:

Correct Answer
verified

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

Correct Answer
verified

Technological progress will:

Correct Answer
verified

If the net expected revenue from an investment is low, then the investment demand curve of an economy will:

Correct Answer
verified
A

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
verified

Exam 10: B: Basic Macroeconomic Relationships

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

The relationship between the real interest rate and investment is shown by the:

Correct AnswerverifiedShow Answer

A specific investment will be undertaken if the expected rate of returns, r, exceeds the interest rate, i.

Correct AnswerverifiedShow Answer

If Smith's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, it may be concluded that her marginal propensity to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedB

Which of the following will not cause the consumption schedule to shift?

Correct AnswerverifiedShow Answer

The multiplier effect:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The investment-demand curve suggests:

Correct AnswerverifiedShow Answer

If for some reason households become increasingly thrifty, we could show this by:

Correct AnswerverifiedShow Answer

Refer to the above diagram.At disposable income level D, the average propensity to save is equal to:

Correct AnswerverifiedB

Which of the following is likely to be an effect of an increase in acquisition, maintenance, and operating costs on the investment demand curve of an economy?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the real interest rate in the economy is i and the expected rate of return from additional investment is r, then other things equal:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Technological progress will:

Correct AnswerverifiedShow Answer

If the net expected revenue from an investment is low, then the investment demand curve of an economy will:

Correct AnswerverifiedA

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 AnswerverifiedShow Answer

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B

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B

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A

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