Question 1

The practical significance of the multiplier is that it:

Accepted Answer

A)  brings about an equality of planned investment and saving.
B)  magnifies relatively small initial changes in spending into larger changes in GDP.
C)  keeps inflation within tolerable limits.
D)  helps to stabilize the economy.E) A) and C)
F) B) and C)

Question 2

In contrast to the investment schedule, the consumption schedule is:

Accepted Answer

A)  relatively stable.
B)  relatively unstable.
C)  downward sloping.
D)  horizontal.E) A) and D)
F) A) and C)

Question 3

Refer to the above data.At the $100 level of income, the average propensity to save is:

Accepted Answer

A)  .10.
B)  .20.
C)  .25.
D)  .90.E) B) and D)
F) B) and C)

Question 4

Refer to the diagram given below. 3. C) only C1, C2, and C3. D) only C4." class="answers-bank-image d-inline" rel="preload" > The diagram given above shows consumption schedules.As income rises, the marginal propensity to consume remains constant for:

Accepted Answer

A)  none of the consumption schedules.
B)  only C3.
C)  only C1, C2, and C3.
D)  only C4.E) B) and D)
F) A) and C)

Question 5

In comparison with the consumption schedule, the investment schedule is:

Accepted Answer

A)  relatively stable.
B)  relatively unstable.
C)  upsloping.
D)  independent of the price level.E) A) and B)
F) A) and C)

Question 6

A rightward shift of the investment-demand curve might be caused by:

Accepted Answer

A)  an increase in the price level.
B)  a decline in the real interest rate.
C)  a decline in the acquisition, maintenance and operating costs.
D)  an increase in business taxes.E) None of the above
F) A) and D)

Question 7

3 only. C) C1, and C2. D) C4 only." class="answers-bank-image d-inline" rel="preload" > Refer to the above diagram.The APC diminishes as income increases for:

Accepted Answer

A)  none of the consumption schedules shown.
B)  C3 only.
C)  C1, and C2.
D)  C4 only.E) All of the above
F) B) and D)

Question 8

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

Question 9

The APC can be defined as the fraction of a:

Accepted Answer

A)  change in income which is not spent.
B)  change in income which is spent.
C)  specific level of total income which is not consumed.
D)  specific level of total income which is consumed.E) All of the above
F) A) and B)

Question 10

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

Question 11

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 15 percent, what amount of investment will be undertaken?

Accepted Answer

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

Question 12

Assume a machine which has a useful life of only one year costs $2,000.Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300.The expected rate of return on this machine is:

Accepted Answer

A)  7.5 percent.
B)  10 percent.
C)  15 percent.
D)  20 percent.E) B) and D)
F) A) and B)

Question 13

A decline in the real interest rate will:

Accepted Answer

A)  increase the amount of investment spending.
B)  shift the investment schedule downward.
C)  shift the investment-demand curve to the right.
D)  shift the investment-demand curve to the left.E) None of the above
F) B) and C)

Question 14

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) None of the above
F) C) and D)

Question 15

An upward shift of the saving schedule suggests:

Accepted Answer

A)  nothing with respect to changes in the APC and APS.
B)  that the APC and APS have both decreased at each GDP level.
C)  that the APC and APS have both increased at each GDP level.
D)  that the APC has decreased and the APS has increased at each GDP level.E) A) and D)
F) All of the above

Question 16

If the MPC is.6, the simple multiplier will be:

Accepted Answer

A)  4.0.
B)  6.0.
C)  2.5.
D)  1.67.E) None of the above
F) A) and C)

Question 17

A business firm will purchase additional capital goods if the real rate of interest it must pay is less than the expected rate of return from the investment.

Accepted Answer

A) True 
 B)False

Question 18

Refer to the above diagram.The break-even level of income is:

Accepted Answer

A)  zero.
B)  150
C)  60
D)  120E) None of the above
F) All of the above

Question 19

The slope of the saving schedule measures the size of the multiplier.

Accepted Answer

A) True 
 B)False

Question 20

If the saving schedule is a straight line, the:

Accepted Answer

A)  MPS must be constant.
B)  APS must be constant.
C)  APC must be constant.
D)  MPC must be rising.E) C) and D)
F) B) and C)

Exam 10: Part B: Basic Macroeconomic Relationships

The slope of the saving schedule measures the size of the multiplier.

Correct Answer
verified

A business firm will purchase additional capital goods if the real rate of interest it must pay is less than the expected rate of return from the investment.

Correct Answer
verified

The APC can be defined as the fraction of a:

Correct Answer
verified

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

Correct Answer
verified

If the saving schedule is a straight line, the:

Correct Answer
verified

Assume a machine which has a useful life of only one year costs $2,000.Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300.The expected rate of return on this machine is:

Correct Answer
verified

In comparison with the consumption schedule, the investment schedule is:

Correct Answer
verified

Refer to the above diagram.The APC diminishes as income increases for:

Correct Answer
verified

A rightward shift of the investment-demand curve might be caused by:

Correct Answer
verified

Correct Answer
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Refer to the above data.At the $100 level of income, the average propensity to save is:

Correct Answer
verified

Refer to the diagram given below. The diagram given above shows consumption schedules.As income rises, the marginal propensity to consume remains constant for:

Correct Answer
verified

The practical significance of the multiplier is that it:

Correct Answer
verified

If the MPC is.6, the simple multiplier will be:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

In contrast to the investment schedule, the consumption schedule is:

Correct Answer
verified

A decline in the real interest rate will:

Correct Answer
verified

Refer to the above diagram.The break-even level of income is:

Correct Answer
verified

An upward shift of the saving schedule suggests:

Correct Answer
verified

Exam 10: Part B: Basic Macroeconomic Relationships

The slope of the saving schedule measures the size of the multiplier.

Correct AnswerverifiedShow Answer

A business firm will purchase additional capital goods if the real rate of interest it must pay is less than the expected rate of return from the investment.

Correct AnswerverifiedShow Answer

The APC can be defined as the fraction of a:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the saving schedule is a straight line, the:

Correct AnswerverifiedShow Answer

Assume a machine which has a useful life of only one year costs $2,000.Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300.The expected rate of return on this machine is:

Correct AnswerverifiedShow Answer

In comparison with the consumption schedule, the investment schedule is:

Correct AnswerverifiedShow Answer

Refer to the above diagram.The APC diminishes as income increases for:

Correct AnswerverifiedShow Answer

A rightward shift of the investment-demand curve might be caused by:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to the above data.At the $100 level of income, the average propensity to save is:

Correct AnswerverifiedShow Answer

Refer to the diagram given below. The diagram given above shows consumption schedules.As income rises, the marginal propensity to consume remains constant for:

Correct AnswerverifiedShow Answer

The practical significance of the multiplier is that it:

Correct AnswerverifiedShow Answer

If the MPC is.6, the simple multiplier will be:

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 save is:

Correct AnswerverifiedShow Answer

In contrast to the investment schedule, the consumption schedule is:

Correct AnswerverifiedShow Answer

A decline in the real interest rate will:

Correct AnswerverifiedShow Answer

Refer to the above diagram.The break-even level of income is:

Correct AnswerverifiedShow Answer

An upward shift of the saving schedule suggests:

Correct AnswerverifiedShow Answer

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