Question 1

If the saving schedule is a straight line,the:

Accepted Answer

A)   MPS must be constant.
B)   APS must be constant.
C)   APC must be constant.
D)   MPC must be rising.E) A) and B)
F) A) and C)

Question 2

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

Question 3

The investment demand curve portrays an inverse (negative) relationship between:

Accepted Answer

A)   investment and real GDP.
B)   the real interest rate and investment.
C)   the nominal interest rate and investment.
D)   the price level and investment.E) None of the above
F) A) and B)

Question 4

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 B)
F) B) and C)

Question 5

The investment demand curve will shift to the right as a result of:

Accepted Answer

A)   an increase in the excess production capacity available in industry.
B)   an increase in business taxes.
C)   technological progress.
D)   an increase in the acquisition and maintenance cost of capital goods.E) A) and B)
F) A) and C)

Question 6

In contrast to investment,consumption is:

Accepted Answer

A)   relatively unstable.
B)   relatively stable.
C)   measurable.
D)   unmeasurable.E) C) and D)
F) All of the above

Question 7

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

Question 8

Art Buchwald's article "Squaring the Economic Circle" humorously describes how:

Accepted Answer

A)   a person's decision not to buy an automobile eventually reduces many people's incomes,including that of the person making the original decision.
B)   a price increase on a single product eventually leads to rapid inflation.
C)   an increase in imports eventually leads to a greater increase in exports.
D)   a government tax rate increase eventually results in the government collecting less tax revenue than before the tax rate hike.E) B) and D)
F) All of the above

Question 9

The multiplier shows the relationship between changes in a component of spending,say,investment,and the consequent changes in real income and output.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)   4.0.
B)   6.0.
C)   2.5.
D)   1.67.E) A) and B)
F) A) and C)

Question 11

The actual multiplier effect in the U.S.economy is less than the multiplier effect in the text examples because:

Accepted Answer

A)   the real-world MPS is larger than the MPS in the examples.
B)   in addition to saving,households use some of any increase in income to buy imported goods and to pay additional taxes.
C)   the gap between the nominal interest rate and the real interest rate widens as the economy expands or contracts.
D)   the MPC in the United States is greater than 1.E) C) and D)
F) All of the above

Question 12

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

Question 13

If the real interest rate in the economy is i and the expected rate of return on additional investment is r,then other things equal:

Accepted Answer

A)   more investment will be forthcoming when i exceeds r.
B)   less investment will be forthcoming when r rises.
C)   r will fall as more investment is undertaken.
D)   r will exceed i at all possible levels of investment.E) None of the above
F) A) and D)

Question 14

Answer the question on the basis of the following table that illustrates the multiplier process.  Refer to the given table.The marginal propensity to save is:

Accepted Answer

A)   .5.
B)   .25.
C)   .2.
D)   .1.E) A) and C)
F) B) and D)

Question 15

If the MPC is .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) A) and C)

Question 16

Answer the question on the basis of the following data for a hypothetical economy.   Disposable Income‾ Saving ‾0−10500100101502020030\begin{array}{cc}\underline{	ext { Disposable Income} } &\underline{ 	ext { Saving } }\0& \mathbf{- 1 0} \50 & 0 \100 & 10 \150 & 20 \200 & 30\end{array} Disposable Income​050100150200​ Saving ​−100102030​ 
 Refer to the given data.At the $100 level of income,the average propensity to save is:

Accepted Answer

A)   .10.
B)   .20.
C)   .25.
D)   .90. E) B) and D)
F) B) and C)

Question 17

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.  Refer to the given data.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) A) and B)
F) A) and C)

Question 18

The investment demand slopes downward and to the right because lower real interest rates:

Accepted Answer

A)   expand consumer borrowing,making investments more profitable.
B)   boost expected rates of returns on investment.
C)   enable more investment projects to be undertaken profitably.
D)   create tax incentives to invest.E) A) and C)
F) All of the above

Question 19

Answer the question on the basis of the following information for a private closed economy.Assume that for the entire business sector of the 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 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 given information.If the real interest rate is 15 percent,what amount of investment will be undertaken?

Accepted Answer

A)   $15.
B)   $30.
C)   $45.
D)   $60.E) C) and D)
F) A) and B)

Question 20

(Advanced analysis) Answer the question on the basis of the following consumption schedule: C = 20 + .9Y,where C is consumption and Y is disposable income. Refer to the given data.At an $800 level of disposable income,the level of saving is:

Accepted Answer

A)   $180.
B)   $740.
C)   $60.
D)   $18.E) B) and D)
F) None of the above

Exam 29: Basic Macroeconomic Relationships

The multiplier shows the relationship between changes in a component of spending,say,investment,and the consequent changes in real income and output.

Correct Answer
verified

Art Buchwald's article "Squaring the Economic Circle" humorously describes how:

Correct Answer
verified

Correct Answer
verified

If the MPC is .70 and investment increases by $3 billion,the equilibrium GDP will:

Correct Answer
verified

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

Correct Answer
verified

In contrast to investment,consumption is:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

The actual multiplier effect in the U.S.economy is less than the multiplier effect in the text examples because:

Correct Answer
verified

(Advanced analysis) Answer the question on the basis of the following consumption schedule: C = 20 + .9Y,where C is consumption and Y is disposable income. Refer to the given data.At an $800 level of disposable income,the level of saving is:

Correct Answer
verified

Correct Answer
verified

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the given data.The marginal propensity to consume:

Correct Answer
verified

The investment demand curve will shift to the right as a result of:

Correct Answer
verified

Answer the question on the basis of the following table that illustrates the multiplier process. Refer to the given table.The marginal propensity to save is:

Correct Answer
verified

The investment demand slopes downward and to the right because lower real interest rates:

Correct Answer
verified

If the real interest rate in the economy is i and the expected rate of return on additional investment is r,then other things equal:

Correct Answer
verified

The investment demand curve portrays an inverse (negative) relationship between:

Correct Answer
verified

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

Correct Answer
verified

If the saving schedule is a straight line,the:

Correct Answer
verified

If the consumption schedule is linear,then the:

Correct Answer
verified

Exam 29: Basic Macroeconomic Relationships

The multiplier shows the relationship between changes in a component of spending,say,investment,and the consequent changes in real income and output.

Correct AnswerverifiedShow Answer

Art Buchwald's article "Squaring the Economic Circle" humorously describes how:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the MPC is .70 and investment increases by $3 billion,the equilibrium GDP will:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In contrast to investment,consumption is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The actual multiplier effect in the U.S.economy is less than the multiplier effect in the text examples because:

Correct AnswerverifiedShow Answer

(Advanced analysis) Answer the question on the basis of the following consumption schedule: C = 20 + .9Y,where C is consumption and Y is disposable income. Refer to the given data.At an $800 level of disposable income,the level of saving is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the given data.The marginal propensity to consume:

Correct AnswerverifiedShow Answer

The investment demand curve will shift to the right as a result of:

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following table that illustrates the multiplier process. Refer to the given table.The marginal propensity to save is:

Correct AnswerverifiedShow Answer

The investment demand slopes downward and to the right because lower real interest rates:

Correct AnswerverifiedShow Answer

If the real interest rate in the economy is i and the expected rate of return on additional investment is r,then other things equal:

Correct AnswerverifiedShow Answer

The investment demand curve portrays an inverse (negative) relationship between:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the saving schedule is a straight line,the:

Correct AnswerverifiedShow Answer

If the consumption schedule is linear,then the:

Correct AnswerverifiedShow Answer

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