Question 1

The reverse wealth effect will tend to decrease consumption and increase saving.

Accepted Answer

A) True 
 B)False

Question 2

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.If the real interest rate is 5 percent, what amount of investment will be undertaken?

Accepted Answer

A)  $15
B)  $30
C)  $45
D)  $60E) None of the above
F) A) and C)

Question 3

If the consumption schedule is linear, then the:

Accepted Answer

A)  saving schedule will also be linear.
B)  MPS will decline as income rises.
C)  MPC will decline as income rises.
D)  APC will be constant at all levels of income.E) C) and D)
F) B) and C)

Question 4

The following table illustrates the multiplier process in a private closed economy:  Refer to the above table.The total change in income resulting from the initial change in investment will be:

Accepted Answer

A)  $100
B)  $20
C)  $80
D)  $200E) C) and D)
F) B) and D)

Question 5

The immediate determinants of investment spending are the:

Accepted Answer

A)  expected rate of return on capital goods and the real interest rate.
B)  level of saving and the real interest rate.
C)  marginal propensity to consume and the real interest rate.
D)  interest rate and the expected price level.E) A) and B)
F) C) and D)

Question 6

When we draw an investment demand curve we hold constant all of the following except:

Accepted Answer

A)  the expected rate of return from the investment.
B)  the interest rate.
C)  business taxes.
D)  the present stock of capital goods.E) B) and C)
F) None of the above

Question 7

The multiplier is useful in determining the:

Accepted Answer

A)  full-employment unemployment rate.
B)  level of unintended investment or disinvestment.
C)  rate of inflation.
D)  change in equilibrium GDP resulting from a change in spending.E) A) and C)
F) A) and B)

Question 8

The use of 1/MPS formula as the size of the multiplier in the economy, overstates the actual size of it because:

Accepted Answer

A)  saving is not the only fraction of the domestic income which is not spent.
B)  saving is the only fraction of the domestic income which is not spent.
C)  imports and taxes create new income in the economy.
D)  imports and not taxes creates new income in the economy.E) None of the above
F) A) and B)

Question 9

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.The marginal propensity to consume in economy (1) :

Accepted Answer

A)  is .5.
B)  is .3.
C)  is .8.
D)  is .7.E) None of the above
F) A) and B)

Question 10

The consumption schedule in the diagram below indicates that:

Accepted Answer

A)  consumers will maximize their satisfaction where the consumption schedule and 45 °\degree° line intersect.
B)  up to a point consumption exceeds income, but then falls below income.
C)  the MPC falls as income increases.
D)  households consume as much as they earn. E) A) and C)
F) B) and C)

Question 11

In view of your answer to the previous question, if the real interest rate is 15 percent in this economy, the aggregate amount of investment will be:

Accepted Answer

A)  $25
B)  $20
C)  $15
D)  $10E) None of the above
F) B) and C)

Question 12

A decline in disposable income:

Accepted Answer

A)  increases consumption by moving upward along a specific consumption schedule.
B)  decreases consumption because it shifts the consumption schedule downward.
C)  decreases consumption by moving downward along a specific consumption schedule.
D)  increases consumption because it shifts the consumption schedule upward.E) All of the above
F) C) and D)

Question 13

Other things equal, the real interest rate and the level of investment are:

Accepted Answer

A)  related only when saving equals planned investment.
B)  unrelated.
C)  inversely related.
D)  directly related.E) All of the above
F) B) and D)

Question 14

The reverse wealth effect will cause the consumption schedule to:

Accepted Answer

A)  shift upward.
B)  shift downward.
C)  not change at all.
D)  shift in the same direction as would occur with the wealth effect.E) None of the above
F) A) and B)

Question 15

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

Accepted Answer

A)  .2.
B)  .8.
C)  .4.
D)  .3.E) A) and D)
F) A) and C)

Question 16

Which of the following countries had the highest percentage of gross investment expenditure relative to GDP in 2014, as per Image 10.2 Global Perspective?

Accepted Answer

A)  China
B)  Korea
C)  Canada
D)  United StatesE) A) and B)
F) A) and C)

Question 17

Refer to the data below.When plotted on a graph, the vertical intercept of the consumption schedule in this economy is _____ and the slope is _____.

Accepted Answer

A)  -2; 1
B)  $2; .18
C)  $100; .5
D)  $2; .9E) A) and C)
F) None of the above

Question 18

Refer to the above diagram.The marginal propensity to save is:

Accepted Answer

A)  CD/EF.
B)  CB/CF.
C)  CB/AF.
D)  EF/CB.E) C) and D)
F) A) and B)

Question 19

Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product.The multiplier for this economy:

Accepted Answer

A)  is 3.
B)  is 4.
C)  is 5.
D)  cannot be determined from the information given.E) None of the above
F) A) and C)

Question 20

The consumption schedule is drawn on the assumption that as disposable income increases consumption will:

Accepted Answer

A)  be unaffected.
B)  increase absolutely, but remain constant as a percentage of income.
C)  increase absolutely, but decline as a percentage of income.
D)  increase absolutely and as a percentage of income.E) A) and B)
F) B) and C)

Exam 10: B: Basic Macroeconomic Relationships

Refer to the data below.When plotted on a graph, the vertical intercept of the consumption schedule in this economy is _ and the slope is _.

Correct Answer
verified

The following table illustrates the multiplier process in a private closed economy: Refer to the above table.The total change in income resulting from the initial change in investment will be:

Correct Answer
verified

When we draw an investment demand curve we hold constant all of the following except:

Correct Answer
verified

Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product.The multiplier for this economy:

Correct Answer
verified

Correct Answer
verified

In view of your answer to the previous question, if the real interest rate is 15 percent in this economy, the aggregate amount of investment will be:

Correct Answer
verified

Which of the following countries had the highest percentage of gross investment expenditure relative to GDP in 2014, as per Image 10.2 Global Perspective?

Correct Answer
verified

The reverse wealth effect will cause the consumption schedule to:

Correct Answer
verified

A decline in disposable income:

Correct Answer
verified

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

Correct Answer
verified

If the consumption schedule is linear, then the:

Correct Answer
verified

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.The marginal propensity to consume in economy (1) :

Correct Answer
verified

The reverse wealth effect will tend to decrease consumption and increase saving.

Correct Answer
verified

Other things equal, the real interest rate and the level of investment are:

Correct Answer
verified

Refer to the above diagram.The marginal propensity to save is:

Correct Answer
verified

The multiplier is useful in determining the:

Correct Answer
verified

The immediate determinants of investment spending are the:

Correct Answer
verified

The use of 1/MPS formula as the size of the multiplier in the economy, overstates the actual size of it because:

Correct Answer
verified

The consumption schedule is drawn on the assumption that as disposable income increases consumption will:

Correct Answer
verified

Correct Answer
verified

Exam 10: B: Basic Macroeconomic Relationships

Refer to the data below.When plotted on a graph, the vertical intercept of the consumption schedule in this economy is _____ and the slope is _____.

Correct AnswerverifiedShow Answer

The following table illustrates the multiplier process in a private closed economy: Refer to the above table.The total change in income resulting from the initial change in investment will be:

Correct AnswerverifiedShow Answer

When we draw an investment demand curve we hold constant all of the following except:

Correct AnswerverifiedShow Answer

Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product.The multiplier for this economy:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In view of your answer to the previous question, if the real interest rate is 15 percent in this economy, the aggregate amount of investment will be:

Correct AnswerverifiedShow Answer

Which of the following countries had the highest percentage of gross investment expenditure relative to GDP in 2014, as per Image 10.2 Global Perspective?

Correct AnswerverifiedShow Answer

The reverse wealth effect will cause the consumption schedule to:

Correct AnswerverifiedShow Answer

A decline in disposable income:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the consumption schedule is linear, then 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.The marginal propensity to consume in economy (1) :

Correct AnswerverifiedShow Answer

The reverse wealth effect will tend to decrease consumption and increase saving.

Correct AnswerverifiedShow Answer

Other things equal, the real interest rate and the level of investment are:

Correct AnswerverifiedShow Answer

Refer to the above diagram.The marginal propensity to save is:

Correct AnswerverifiedShow Answer

The multiplier is useful in determining the:

Correct AnswerverifiedShow Answer

The immediate determinants of investment spending are the:

Correct AnswerverifiedShow Answer

The use of 1/MPS formula as the size of the multiplier in the economy, overstates the actual size of it because:

Correct AnswerverifiedShow Answer

The consumption schedule is drawn on the assumption that as disposable income increases consumption will:

Correct AnswerverifiedShow Answer

The consumption schedule in the diagram below indicates that:

Correct AnswerverifiedShow Answer

Refer to the data below.When plotted on a graph, the vertical intercept of the consumption schedule in this economy is _ and the slope is _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified