Question 1

The multiplier can be calculated as

Accepted Answer

A)  1/(MPS + MP
C)  .
B)  MPC/MPS.
C)  1/(1 − MP
C)  .
D)  1 − MPC = MPS.E) A) and C)
F) B) and D)

Question 2

As disposable income decreases, the

Accepted Answer

A)  average propensity to consume increases.
B)  average propensity to consume decreases.
C)  level of consumption increases.
D)  level of saving increases.E) C) and D)
F) A) and B)

Question 3

If the real rate of interest increases, then the level of investment in the economy will also increase.

Accepted Answer

A) True 
 B)False

Question 4

The multiplier measures the change in real GDP that results from a given change in the price level.

Accepted Answer

A) True 
 B)False

Question 5

The saving schedule is such that as aggregate income increases by a certain amount, saving

Accepted Answer

A)  increases by the same amount as the increase in income.
B)  does not change.
C)  increases, but by a smaller amount.
D)  increases by an even larger amount.E) B) and C)
F) None of the above

Question 6

If the MPC is 0.70 and investment increases by $3 billion, the equilibrium GDP will

Accepted Answer

A)  increase by $10 billion.
B)  increase by $2.10 billion.
C)  decrease by $4.29 billion.
D)  increase by $4.29 billion.E) A) and B)
F) None of the above

Question 7

If disposable income increases from $912 to $927 billion and MPC = 0.6, then consumption will increase by

Accepted Answer

A)  $6 billion.
B)  $9 billion.
C)  $54 billion.
D)  $56 billion.E) A) and B)
F) All of the above

Question 8

Which of the following would shift the saving schedule upward?

Accepted Answer

A)  a decrease in wealth
B)  a decrease in real interest rates
C)  consumer expectations of rising prices of products
D)  increased optimism about future incomesE) None of the above
F) B) and C)

Question 9

Assume a machine that 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.If the firm finds it can borrow funds at an interest rate of 10 percent, the firm should

Accepted Answer

A)  not purchase the machine, because the expected rate of return exceeds the interest rate.
B)  not purchase the machine, because the interest rate exceeds the expected rate of return.
C)  purchase the machine because the expected rate of return exceeds the interest rate.
D)  purchase the machine because the interest rate exceeds the expected rate of return.E) A) and B)
F) None of the above

Question 10

The size of the multiplier is equal to the

Accepted Answer

A)  slope of the consumption schedule.
B)  reciprocal of the slope of the consumption schedule.
C)  slope of the saving schedule.
D)  reciprocal of the slope of the saving schedule.E) All of the above
F) A) and C)

Question 11

If the MPS is only half as large as the MPC, the multiplier is

Accepted Answer

A)  2.
B)  3.
C)  4.
D)  5.E) All of the above
F) B) and D)

Question 12

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

Accepted Answer

A)  all the points where the MPC is constant.
B)  all the 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) B) and C)
F) A) and B)

Question 13

The APC is calculated as

Accepted Answer

A)  change in consumption/change in income.
B)  consumption/income.
C)  change in income/change in consumption.
D)  income/consumption.E) A) and D)
F) A) and C)

Question 14

If the slope of the consumption schedule is 0.75, then the slope of the saving schedule

Accepted Answer

A)  is 0.25.
B)  is 0.75.
C)  is 1.25.
D)  cannot be determined from the data.E) C) and D)
F) All of the above

Question 15

The investment demand curve suggests that

Accepted Answer

A)  changes in the real interest rate will not affect the amount invested.
B)  there is an inverse relationship between the real rate of interest and the level of investment spending.
C)  an increase in business taxes will tend to stimulate investment spending.
D)  there is a direct relationship between the real rate of interest and the level of investment spending.E) A) and B)
F) None of the above

Question 16

The investment demand curve will shift to the left as the result of

Accepted Answer

A)  business pessimism about future economic conditions.
B)  limited available productive capacity.
C)  an increase in the interest rate.
D)  a decrease in business taxes.E) B) and C)
F) A) and C)

Question 17

The multiplier is useful in determining the

Accepted Answer

A)  full-employment unemployment rate.
B)  level of business inventories.
C)  change in the rate of inflation from a change in the interest rate.
D)  change in GDP resulting from a change in spending.E) C) and D)
F) None of the above

Question 18

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) All of the above
F) A) and B)

Question 19

In the late 1990s, the U.S.stock market boomed, causing U.S.consumption to rise.Economists refer to this outcome as the

Accepted Answer

A)  Keynes effect.
B)  interest-rate effect.
C)  wealth effect.
D)  multiplier effect.E) None of the above
F) A) and B)

Question 20

If disposable income is $900 billion when the average propensity to consume is 0.9, it can be concluded that

Accepted Answer

A)  the marginal propensity to consume is also 0.9.
B)  the marginal propensity to save is 0.1.
C)  consumption is $900 billion.
D)  saving is $90 billion.E) A) and D)
F) B) and C)

Exam 30: Basic Macroeconomic Relationships

A decline in the real interest rate will

Correct Answer
verified

Which of the following would shift the saving schedule upward?

Correct Answer
verified

The investment demand curve suggests that

Correct Answer
verified

As disposable income decreases, the

Correct Answer
verified

If the MPS is only half as large as the MPC, the multiplier is

Correct Answer
verified

If the slope of the consumption schedule is 0.75, then the slope of the saving schedule

Correct Answer
verified

The multiplier can be calculated as

Correct Answer
verified

The multiplier measures the change in real GDP that results from a given change in the price level.

Correct Answer
verified

The APC is calculated as

Correct Answer
verified

Correct Answer
verified

The multiplier is useful in determining the

Correct Answer
verified

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

Correct Answer
verified

The saving schedule is such that as aggregate income increases by a certain amount, saving

Correct Answer
verified

If disposable income increases from $912 to $927 billion and MPC = 0.6, then consumption will increase by

Correct Answer
verified

If the real rate of interest increases, then the level of investment in the economy will also increase.

Correct Answer
verified

In the late 1990s, the U.S.stock market boomed, causing U.S.consumption to rise.Economists refer to this outcome as the

Correct Answer
verified

If the MPC is 0.70 and investment increases by $3 billion, the equilibrium GDP will

Correct Answer
verified

The size of the multiplier is equal to the

Correct Answer
verified

The investment demand curve will shift to the left as the result of

Correct Answer
verified

If disposable income is $900 billion when the average propensity to consume is 0.9, it can be concluded that

Correct Answer
verified

Exam 30: Basic Macroeconomic Relationships

A decline in the real interest rate will

Correct AnswerverifiedShow Answer

Which of the following would shift the saving schedule upward?

Correct AnswerverifiedShow Answer

The investment demand curve suggests that

Correct AnswerverifiedShow Answer

As disposable income decreases, the

Correct AnswerverifiedShow Answer

If the MPS is only half as large as the MPC, the multiplier is

Correct AnswerverifiedShow Answer

If the slope of the consumption schedule is 0.75, then the slope of the saving schedule

Correct AnswerverifiedShow Answer

The multiplier can be calculated as

Correct AnswerverifiedShow Answer

The multiplier measures the change in real GDP that results from a given change in the price level.

Correct AnswerverifiedShow Answer

The APC is calculated as

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The multiplier is useful in determining the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The saving schedule is such that as aggregate income increases by a certain amount, saving

Correct AnswerverifiedShow Answer

If disposable income increases from $912 to $927 billion and MPC = 0.6, then consumption will increase by

Correct AnswerverifiedShow Answer

If the real rate of interest increases, then the level of investment in the economy will also increase.

Correct AnswerverifiedShow Answer

In the late 1990s, the U.S.stock market boomed, causing U.S.consumption to rise.Economists refer to this outcome as the

Correct AnswerverifiedShow Answer

If the MPC is 0.70 and investment increases by $3 billion, the equilibrium GDP will

Correct AnswerverifiedShow Answer

The size of the multiplier is equal to the

Correct AnswerverifiedShow Answer

The investment demand curve will shift to the left as the result of

Correct AnswerverifiedShow Answer

If disposable income is $900 billion when the average propensity to consume is 0.9, it can be concluded that

Correct AnswerverifiedShow Answer

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