Question 1

The consumption and saving schedules reveal that the

Accepted Answer

A)   MPC is greater than zero but less than one.
B)   MPC and APC are equal at the point where the consumption schedule intersects the 45- degree line.
C)   APS is positive at all income levels.
D)   MPC is equal to or greater than one at all income levels.E) All of the above
F) B) and C)

Question 2

As disposable income decreases, consumption

Accepted Answer

A)   and saving both increase.
B)   and saving both decrease.
C)   increases and saving decreases.
D)   decreases and saving increases.E) A) and D)
F) A) and C)

Question 3

If the consumption schedule is linear, then the

Accepted Answer

A)   saving schedule will also be linear.
B)   MPS will decline as income rises.
C)   MPC will decline as income rises.
D)   APC will be constant at all levels of income.E) None of the above
F) B) and C)

Question 4

Assume the economy's consumption and saving schedules simultaneously shift downward. This must be the result of

Accepted Answer

A)   an increase in disposable income.
B)   an increase in household wealth.
C)   an increase in personal taxes.
D)   the expectation of a recession.E) All of the above
F) A) and C)

Question 5

Other things equal, a decrease in the real interest rate will

Accepted Answer

A)   shift the investment demand curve to the right.
B)   shift the investment demand curve to the left.
C)   move the economy upward along its existing investment demand curve.
D)   move the economy downward along its existing investment demand curve.E) A) and B)
F) C) and D)

Question 6

Refer to the diagram. At disposable income level D, consumption is equal to

Accepted Answer

A)   CD.
B)   D minus CD.
C)   CD/D.
D)   CD plus BD.E) C) and D)
F) A) and C)

Question 7

If the slope of a linear consumption schedule increases in a private closed economy, then it can be concluded that the

Accepted Answer

A)   MPS has increased.
B)   MPC has increased.
C)   income has increased.
D)   income has decreased.E) B) and C)
F) A) and D)

Question 8

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

Accepted Answer

A)   a downshift of the saving schedule.
B)   an upward shift of the consumption schedule.
C)   an upward shift of the saving schedule.
D)   a movement down along a stable consumption function.E) A) and C)
F) All of the above

Question 9

The MPC for an economy is

Accepted Answer

A)   the slope of the consumption schedule or line.
B)   the slope of the savings schedule or line.
C)   1 divided by the slope of the consumption schedule or line.
D)   1 divided by the slope of the savings schedule or line.E) A) and B)
F) A) and C)

Question 10

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

Question 11

Refer to the given graph. A shift of the consumption schedule from C2 to C1 might be caused by a(n)

Accepted Answer

A)   increase in real GDP.
B)   reverse wealth effect, caused by a decrease in stock market prices.
C)   decrease in income tax rates.
D)   decrease in saving.E) A) and B)
F) C) and D)

Question 12

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) None of the above

Question 13

Assume that for the entire business sector of a private closed economy, there are $0 worth of investment projects that will yield an expected rate of return of 25 percent or more. But there are $15
Worth of investments that will yield an expected rate of return of 20-25 percent, another $15 with an
Expected rate of return of 15-20 percent, and an additional $15 of investment projects in each
Successive rate of return range down to and including the 0-5 percent range. 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) A) and D)
F) C) and D)

Question 14

Refer to the diagram. Assume that for the entire business sector of a private closed economy there is $0 worth of investment projects that will yield an expected rate of return of 25 percent or more. But
There are $15 worth of investments that will yield an expected rate of return of 20-25 percent; another
$15 with an expected rate of return of 15-20 percent; and an additional $15 of investment projects in
Each successive rate of return range down to and including the 0-5 percent range. Which of the lines
On the diagram represents these data?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) None of the above
F) A) and C)

Question 15

Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. Suppose that consumption decreased
By $2 billion at each level of DI in each of the three countries. We can conclude that the

Accepted Answer

A)   marginal propensity to consume will remain unchanged in each of the three countries.
B)   marginal propensity to consume will decline in each of the three countries.
C)   average propensity to save will fall at each level of DI in each of the three countries.
D)   marginal propensity to save will rise in each of the three countries.E) B) and C)
F) A) and D)

Question 16

The consumption schedule is such that

Accepted Answer

A)   both the APC and the MPC increase as income rises.
B)   the APC is constant and the MPC declines as income rises.
C)   the MPC is constant and the APC declines as income rises.
D)   the MPC and the APC must be equal at all levels of income.E) B) and C)
F) A) and D)

Question 17

When a consumption schedule is plotted as a straight line, the slope of the consumption line is

Accepted Answer

A)   vertical.
B)   horizontal.
C)   greater than the slope of the 45° line.
D)   less than the slope of the 45° line.E) None of the above
F) All of the above

Question 18

(Last Word)  Art Buchwald's article "Squaring the Economic Circle" is a humorous description of

Accepted Answer

A)   a negative GDP gap.
B)   a positive GDP gap.
C)   the marginal propensity to save.
D)   the multiplier.E) A) and C)
F) B) and C)

Question 19

Other things equal, a 10 percent decrease in corporate income taxes will

Accepted Answer

A)   decrease the market price of real capital goods.
B)   have no effect on the location of the investment demand curve.
C)   shift the investment demand curve to the right.
D)   shift the investment demand curve to the left.E) B) and D)
F) B) and C)

Question 20

Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. The marginal propensity to consume

Accepted Answer

A)   is highest in economy (1) .
B)   is highest in economy (2) .
C)   is highest in economy (3) .
D)   cannot be calculated from the data given.E) B) and D)
F) A) and B)

Exam 10: Basic Macroeconomic Relationships

If the slope of a linear consumption schedule increases in a private closed economy, then it can be concluded that the

Correct Answer
verified

Correct Answer
verified

Other things equal, a decrease in the real interest rate will

Correct Answer
verified

Refer to the diagram. At disposable income level D, consumption is equal to

Correct Answer
verified

Assume the economy's consumption and saving schedules simultaneously shift downward. This must be the result of

Correct Answer
verified

The MPC for an economy is

Correct Answer
verified

Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. The marginal propensity to consume

Correct Answer
verified

A decline in the real interest rate will

Correct Answer
verified

When a consumption schedule is plotted as a straight line, the slope of the consumption line is

Correct Answer
verified

(Last Word) Art Buchwald's article "Squaring the Economic Circle" is a humorous description of

Correct Answer
verified

If the consumption schedule is linear, then the

Correct Answer
verified

Correct Answer
verified

Other things equal, a 10 percent decrease in corporate income taxes will

Correct Answer
verified

As disposable income decreases, consumption

Correct Answer
verified

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

Correct Answer
verified

Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. Suppose that consumption decreased By $2 billion at each level of DI in each of the three countries. We can conclude that the

Correct Answer
verified

The consumption schedule is such that

Correct Answer
verified

Refer to the given graph. A shift of the consumption schedule from C2 to C1 might be caused by a(n)

Correct Answer
verified

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

Correct Answer
verified

The consumption and saving schedules reveal that the

Correct Answer
verified

Exam 10: Basic Macroeconomic Relationships

If the slope of a linear consumption schedule increases in a private closed economy, then it can be concluded that the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Other things equal, a decrease in the real interest rate will

Correct AnswerverifiedShow Answer

Refer to the diagram. At disposable income level D, consumption is equal to

Correct AnswerverifiedShow Answer

Assume the economy's consumption and saving schedules simultaneously shift downward. This must be the result of

Correct AnswerverifiedShow Answer

The MPC for an economy is

Correct AnswerverifiedShow Answer

Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. The marginal propensity to consume

Correct AnswerverifiedShow Answer

A decline in the real interest rate will

Correct AnswerverifiedShow Answer

When a consumption schedule is plotted as a straight line, the slope of the consumption line is

Correct AnswerverifiedShow Answer

(Last Word) Art Buchwald's article "Squaring the Economic Circle" is a humorous description of

Correct AnswerverifiedShow Answer

If the consumption schedule is linear, then the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Other things equal, a 10 percent decrease in corporate income taxes will

Correct AnswerverifiedShow Answer

As disposable income decreases, consumption

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. Suppose that consumption decreased By $2 billion at each level of DI in each of the three countries. We can conclude that the

Correct AnswerverifiedShow Answer

The consumption schedule is such that

Correct AnswerverifiedShow Answer

Refer to the given graph. A shift of the consumption schedule from C2 to C1 might be caused by a(n)

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The consumption and saving schedules reveal that the

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified