Question 1

The consumption schedule relates:

Accepted Answer

A)   consumption to the level of disposable income.
B)   saving to the level of disposable income.
C)   disposable income to domestic income.
D)   consumption to saving.E) A) and C)
F) A) and B)

Question 2

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) A) and C)
F) B) and D)

Question 3

The initial costs of capital goods,and the estimated costs of operating and maintaining those goods,affect the expected rate of return on investment.

Accepted Answer

A) True 
 B)False

Question 4

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) B) and C)
F) A) and D)

Question 5

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) C) and D)
F) All of the above

Question 6

Dissaving occurs where:

Accepted Answer

A)   income exceeds consumption.
B)   saving exceeds consumption.
C)   consumption exceeds income.
D)   saving exceeds income.E) None of the above
F) A) and B)

Question 7

Holly's break-even level of income is $10,000 and her MPC is 0.75.If her actual disposable income is $16,000,her level of:

Accepted Answer

A)   consumption spending will be $14,500.
B)   consumption spending will be $4,500.
C)   consumption spending will be $13,000.
D)   saving will be $2,500.E) All of the above
F) C) and D)

Question 8

Which of the following is correct?

Accepted Answer

A)   MPC + MPS = APC + APS
B)   APC + MPS = APS + MPC
C)   APC + MPC = APS + MPS
D)   APC - APS = MPC - MPSE) B) and D)
F) All of the above

Question 9

The investment-demand curve will shift to the left:

Accepted Answer

A)   if firms plan to increase their inventories.
B)   if firms plan to decrease their inventories.
C)   if firms expect an increase in their sales.
D)   if firms expect no change in their sales.E) C) and D)
F) B) and D)

Question 10

The saving schedule is drawn on the assumption that as income increases:

Accepted Answer

A)   saving will decline absolutely and as a percentage of income.
B)   saving will increase absolutely,but remain constant as a percentage of income.
C)   saving will increase absolutely,but decline as a percentage of income.
D)   saving will increase absolutely and as a percentage of income.E) None of the above
F) B) and C)

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 5 percent,what amount of investment will be undertaken?

Accepted Answer

A)   $15
B)   $30
C)   $45
D)   $60E) All of the above
F) A) and B)

Question 12

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.E) None of the above
F) B) and C)

Question 13

Suppose the government finds it can increase equilibrium real GDP by $45 billion by increasing government purchases by $18 billion.On the basis of this information we can say that the:

Accepted Answer

A)   MPS in this economy is .4.
B)   MPC in this economy is .4.
C)   MPC in this economy is .3
D)   multiplier is 3.E) A) and D)
F) A) and B)

Question 14

As disposable income goes up the:

Accepted Answer

A)   APC falls.
B)   APS falls.
C)   volume of consumption declines absolutely.
D)   volume of investment can be expected to diminish.E) A) and D)
F) C) and D)

Question 15

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) A) and C)
F) A) and D)

Question 16

Suppose an economy's consumption schedule shifts from C1 to C 2 as shown in the diagram below.We can say that its: 1 to C 2 as shown in the diagram below.We can say that its:   A)  MPC has increased but its APC at each income level is unchanged. B)  APC at each income level is increased but its MPC is unchanged. C)  MPC and APC at each income level have both increased. D)  MPC and APC at each income level have both decreased." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   MPC has increased but its APC at each income level is unchanged.
B)   APC at each income level is increased but its MPC is unchanged.
C)   MPC and APC at each income level have both increased.
D)   MPC and APC at each income level have both decreased.E) B) and D)
F) A) and D)

Question 17

Economists disagree on the actual size of the multiplier.

Accepted Answer

A) True 
 B)False

Question 18

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

Question 19

The 45-degree line on a chart relating consumption and income shows:

Accepted Answer

A)   all points where the MPC is constant.
B)   all points at which saving and income are equal.
C)   all the points at which consumption and income are equal.
D)   the amounts households will plan to save at each possible level of income.E) None of the above
F) All of the above

Question 20

-The above figure shows the saving schedules for economies 1,2,3,and 4.Which economy has the highest marginal propensity to consume?

Accepted Answer

A)   1
B)   2
C)   3
D)   4E) B) and C)
F) A) and B)

Exam 10: 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.The marginal propensity to consume in economy (1) :

Correct Answer
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The reverse wealth effect will cause the consumption schedule to:

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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Dissaving occurs where:

Correct Answer
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Economists disagree on the actual size of the multiplier.

Correct Answer
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The 45-degree line on a chart relating consumption and income shows:

Correct Answer
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The saving schedule is drawn on the assumption that as income increases:

Correct Answer
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The consumption schedule relates:

Correct Answer
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Suppose the government finds it can increase equilibrium real GDP by $45 billion by increasing government purchases by $18 billion.On the basis of this information we can say that the:

Correct Answer
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Which of the following is correct?

Correct Answer
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As disposable income goes up the:

Correct Answer
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Suppose an economy's consumption schedule shifts from C₁ to C ₂ as shown in the diagram below.We can say that its:

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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The initial costs of capital goods,and the estimated costs of operating and maintaining those goods,affect the expected rate of return on investment.

Correct Answer
verified

-The above figure shows the saving schedules for economies 1,2,3,and 4.Which economy has the highest marginal propensity to consume?

Correct Answer
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Holly's break-even level of income is $10,000 and her MPC is 0.75.If her actual disposable income is $16,000,her level of:

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

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

Correct Answer
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The investment-demand curve will shift to the left:

Correct Answer
verified

Exam 10: 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.The marginal propensity to consume in economy (1) :

Correct AnswerverifiedShow Answer

The reverse wealth effect will cause the consumption schedule to:

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 AnswerverifiedShow Answer

Dissaving occurs where:

Correct AnswerverifiedShow Answer

Economists disagree on the actual size of the multiplier.

Correct AnswerverifiedShow Answer

The 45-degree line on a chart relating consumption and income shows:

Correct AnswerverifiedShow Answer

The saving schedule is drawn on the assumption that as income increases:

Correct AnswerverifiedShow Answer

The consumption schedule relates:

Correct AnswerverifiedShow Answer

Suppose the government finds it can increase equilibrium real GDP by $45 billion by increasing government purchases by $18 billion.On the basis of this information we can say that the:

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

As disposable income goes up the:

Correct AnswerverifiedShow Answer

Suppose an economy's consumption schedule shifts from C1 to C 2 as shown in the diagram below.We can say that its:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The initial costs of capital goods,and the estimated costs of operating and maintaining those goods,affect the expected rate of return on investment.

Correct AnswerverifiedShow Answer

-The above figure shows the saving schedules for economies 1,2,3,and 4.Which economy has the highest marginal propensity to consume?

Correct AnswerverifiedShow Answer

Holly's break-even level of income is $10,000 and her MPC is 0.75.If her actual disposable income is $16,000,her level of:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The investment-demand curve will shift to the left:

Correct AnswerverifiedShow Answer

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Suppose an economy's consumption schedule shifts from C₁ to C ₂ as shown in the diagram below.We can say that its:

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