Question 1

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

Question 2

Tessa's break-even 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 $15,500.
C)   consumption spending will be $13,000.
D)   saving will be $2,500.E) B) and C)
F) None of the above

Question 3

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

Question 4

Refer to the consumption schedule shown in the graph. As income falls from level 3 to level 2, the amount of

Accepted Answer

A)   consumption increases and the amount of dissaving increases.
B)   consumption decreases and the amount of dissaving decreases.
C)   consumption decreases and the amount of saving decreases.
D)   consumption decreases and the amount of saving increases.E) All of the above
F) A) and C)

Question 5

The consumption schedule shows

Accepted Answer

A)   a direct relationship between aggregate consumption and accumulated wealth.
B)   a direct relationship between aggregate consumption and aggregate income.
C)   an inverse relationship between aggregate consumption and accumulated ﬁnancial wealth.
D)   an inverse relationship between aggregate consumption and the price level.E) C) and D)
F) B) and C)

Question 6

Disposable Income  Consumption $0$88080160152240224320296400368\begin{array} { | c | c | } \hline 	ext { Disposable Income } & 	ext { Consumption } \\hline \$ 0 & \$ 8 \\hline 80 & 80 \\hline 160 & 152 \\hline 240 & 224 \\hline 320 & 296 \\hline 400 & 368 \\hline\end{array} Disposable Income $080160240320400​ Consumption $880152224296368​​  The disposable income (DI)  and consumption (C)  schedules are for a private, closed economy. All ?gures are in billions of dollars. The marginal propensity to save in this economy is

Accepted Answer

A)   0.1.
B)   0.72.
C)   0.8.
D)   0.9. E) A) and B)
F) None of the above

Question 7

An increase in disposable income

Accepted Answer

A)   increases consumption because it shifts the consumption schedule upward.
B)   decreases consumption because it shifts the consumption schedule downward.
C)   increases consumption by moving upward along a given consumption schedule.
D)   decreases consumption by moving downward along a given consumption schedule.E) None of the above
F) A) and B)

Question 8

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

Question 9

The greater is the marginal propensity to consume, the

Accepted Answer

A)   smaller is the marginal propensity to save.
B)   higher is the interest rate.
C)   smaller is the average propensity to consume.
D)   lower is the price level.E) None of the above
F) B) and C)

Question 10

(Advanced analysis)  Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. When plotted on a graph,
The vertical intercept of the consumption schedule in economy (3)  is _____ and the slope is _____.

Accepted Answer

A)   minus $2; 0.9
B)   $2; 0.18
C)   $100; 0.5
D)   $2; 0.9E) A) and C)
F) C) and D)

Question 11

If the marginal propensity to consume is 0.9, then the marginal propensity to save must be

Accepted Answer

A)   1.0
B)   0.1.
C)   1.1.
D)   0.9.E) C) and D)
F) All of the above

Question 12

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

Accepted Answer

A)   the expected rate of return on the investment.
B)   business taxes.
C)   the interest rate.
D)   the present stock of capital goods.E) A) and D)
F) B) and D)

Question 13

Which one of the following will cause a movement down along an economy's consumption schedule?

Accepted Answer

A)   an increase in stock prices
B)   a decrease in stock prices
C)   an increase in consumer indebtedness
D)   a decrease in disposable incomeE) A) and D)
F) A) and C)

Exam 10: Basic Macroeconomic Relationships

(Advanced analysis) Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. When plotted on a graph, The vertical intercept of the consumption schedule in economy (3) is _ and the slope is _.

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

Correct Answer
verified

The consumption schedule shows

Correct Answer
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If the marginal propensity to consume is 0.9, then the marginal propensity to save must be

Correct Answer
verified

Which one of the following will cause a movement down along an economy's consumption schedule?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
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An increase in disposable income

Correct Answer
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Refer to the consumption schedule shown in the graph. As income falls from level 3 to level 2, the amount of

Correct Answer
verified

The multiplier is useful in determining the

Correct Answer
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As disposable income decreases, the

Correct Answer
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The greater is the marginal propensity to consume, the

Correct Answer
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Exam 10: Basic Macroeconomic Relationships

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A high rate of inﬂation is likely to cause a

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The consumption schedule shows

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If the marginal propensity to consume is 0.9, then the marginal propensity to save must be

Correct AnswerverifiedShow Answer

Which one of the following will cause a movement down along an economy's consumption schedule?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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An increase in disposable income

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Refer to the consumption schedule shown in the graph. As income falls from level 3 to level 2, the amount of

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The multiplier is useful in determining the

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As disposable income decreases, the

Correct AnswerverifiedShow Answer

The greater is the marginal propensity to consume, the

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Correct AnswerverifiedShow Answer

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