Question 1

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

Question 2

If a $500 billion increase in investment spending increases income by $500 billion in the first round of the multiplier process and by $450 in the second round, income will eventually increase by:

Accepted Answer

A)   $2500 billion.
B)   $3000 billion.
C)   $4000 billion.
D)   $5000 billion.E) All of the above
F) None of the above

Question 3

-Refer to the consumption schedules shown in the above diagram for economies 1, 2, 3, and 4. Other things equal, which economy embodies the greatest degree of macroeconomic stability?

Accepted Answer

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

Question 4

A high rate of inflation is likely to cause a:

Accepted Answer

A)   high nominal interest rate.
B)   low nominal interest rate.
C)   low rate of growth of nominal GDP.
D)   decrease in nominal wages.E) A) and B)
F) A) and C)

Question 5

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

Question 6

1/2 percent. B)  dissaving is $5. C)  the average propensity to save is .20. D)  the average propensity to consume is .80." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above data. At the $200 level of disposable income:

Accepted Answer

A)   the marginal propensity to save is 21/2 percent.
B)   dissaving is $5.
C)   the average propensity to save is .20.
D)   the average propensity to consume is .80.E) A) and D)
F) C) and D)

Question 7

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) B) 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) A) and C)

Question 9

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

Accepted Answer

A)   .25
B)   .75.
C)   .20.
D)   .80.E) None of the above
F) A) and C)

Question 10

Which of the following is correct?

Accepted Answer

A)   APC + APS = 1.
B)   APC + MPS = 1.
C)   APS + MPC = 1.
D)   APS + MPS = 1.E) A) and D)
F) B) and C)

Question 11

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) All of the above
F) None of the above

Question 12

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 C)
F) B) and C)

Question 13

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 indeterminant.
D)   cannot be calculated without knowing the level of saving.E) A) and B)
F) A) and C)

Question 14

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

Question 15

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

Question 16

Assume there are no prospective investment projects (I)  which will yield an expected rate of return (r)  of 25 percent or more, but that there are $5 billion of investment opportunities with an expected rate of return between 20 and 25 percent, an additional $5 billion between 15 and 20 percent, and so on. The investment-demand curve for this economy is:

Accepted Answer

A)   Column A
B)   Column B
C)   Column C
D)   Column DE) B) and C)
F) A) and D)

Question 17

If the equation C = 20 + .6Y, where C is consumption and Y is disposable income, were graphed:

Accepted Answer

A)   the vertical intercept would be +.6 and the slope would be +20.
B)   it would reveal an inverse relationship between consumption and disposable income.
C)   the vertical intercept would be negative, but consumption would increase as disposable income rises.
D)   the vertical intercept would be +20 and the slope would be +.6.E) All of the above
F) A) and D)

Question 18

Suppose the economy's saving schedule shifts from S1 to S 2 as shown in the below diagram. We can say that its: 1 to S 2 as shown in the below diagram. We can say that its:   A)  MPC has increased. B)  MPS has increased. C)  APS has increased at all levels of disposable income. D)  APS has decreased at all levels of disposable income." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   MPC has increased.
B)   MPS has increased.
C)   APS has increased at all levels of disposable income.
D)   APS has decreased at all levels of disposable income.E) A) and B)
F) C) and D)

Question 19

If the Brown family's marginal propensity to consume is 0.70, then it will consume seven-tenths of its total income.

Accepted Answer

A) True 
 B)False

Question 20

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 B)
F) All of the above

Exam 8: Basic Macroeconomic Relationships

An upward shift of the saving schedule suggests:

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

Correct Answer
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Correct Answer
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The investment-demand curve suggests:

Correct Answer
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-Refer to the above data. At the $200 level of disposable income:

Correct Answer
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-Refer to the consumption schedules shown in the above diagram for economies 1, 2, 3, and 4. Other things equal, which economy embodies the greatest degree of macroeconomic stability?

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

Correct Answer
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If the Brown family's marginal propensity to consume is 0.70, then it will consume seven-tenths of its total income.

Correct Answer
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Which of the following is correct?

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

Correct Answer
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A high rate of inflation is likely to cause a:

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

Correct Answer
verified

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

Correct Answer
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Suppose the economy's saving schedule shifts from S₁ to S ₂ as shown in the below diagram. We can say that its:

Correct Answer
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If a $500 billion increase in investment spending increases income by $500 billion in the first round of the multiplier process and by $450 in the second round, income will eventually increase by:

Correct Answer
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If the equation C = 20 + .6Y, where C is consumption and Y is disposable income, were graphed:

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

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

Correct Answer
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Which of the following is correct?

Correct Answer
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Exam 8: Basic Macroeconomic Relationships

An upward shift of the saving schedule suggests:

Correct AnswerverifiedShow Answer

The investment-demand curve will shift to the left:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The investment-demand curve suggests:

Correct AnswerverifiedShow Answer

-Refer to the above data. At the $200 level of disposable income:

Correct AnswerverifiedShow Answer

-Refer to the consumption schedules shown in the above diagram for economies 1, 2, 3, and 4. Other things equal, which economy embodies the greatest degree of macroeconomic stability?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the Brown family's marginal propensity to consume is 0.70, then it will consume seven-tenths of its total income.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A high rate of inflation is likely to cause a:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the economy's saving schedule shifts from S1 to S 2 as shown in the below diagram. We can say that its:

Correct AnswerverifiedShow Answer

If a $500 billion increase in investment spending increases income by $500 billion in the first round of the multiplier process and by $450 in the second round, income will eventually increase by:

Correct AnswerverifiedShow Answer

If the equation C = 20 + .6Y, where C is consumption and Y is disposable income, were graphed:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The reverse wealth effect will cause the consumption schedule to:

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

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Suppose the economy's saving schedule shifts from S₁ to S ₂ as shown in the below diagram. We can say that its:

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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