Question 1

Refer to the data below. The MPS is:

Accepted Answer

A)   7/10.
B)   3/10.
C)   2/5.
D)   3/5.E) A) and B)
F) C) and D)

Question 2

As aggregate income increases, the APC:

Accepted Answer

A)   and APS will both increase.
B)   will decrease, but the APS will increase.
C)   will increase, but the APS will decrease.
D)   and APS will both decrease.E) B) and C)
F) C) and D)

Question 3

The multiplier is useful in determining the:

Accepted Answer

A)   full-employment unemployment rate.
B)   level of unintended investment or disinvestment.
C)   rate of inflation.
D)   change in equilibrium GDP resulting from a change in spending.E) C) and D)
F) All of the above

Question 4

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

Accepted Answer

A)   an increase in the excess productive 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) None of the above
F) C) and D)

Question 5

Which of the following relations is not correct?

Accepted Answer

A)   1 - MPC = MPS
B)   MPS = MPC + 1
C)   APS + APC = 1
D)   MPC + MPS = 1E) None of the above
F) A) and B)

Question 6

-Refer to the above diagram. At income level F the volume of saving is:

Accepted Answer

A)   BD.
B)   AB.
C)   CF - BF.
D)   DC.E) B) and D)
F) A) and B)

Question 7

The consumption schedule in the diagram below indicates that:

Accepted Answer

A)   consumers will maximize their satisfaction where the consumption schedule and 45° line intersect.
B)   up to a point consumption exceeds income, but then falls below income.
C)   the MPC falls as income increases.
D)   households consume as much as they earn.E) C) and D)
F) A) and D)

Question 8

The multiplier effect indicates that:

Accepted Answer

A)   a decline in the interest rate will cause a proportionately larger increase in investment.
B)   a change in aggregate expenditures will change aggregate income by a larger amount.
C)   a change in aggregate expenditures will increase aggregate income by the same amount.
D)   a small increase in total income will generate a large change in aggregate expenditures.E) None of the above
F) A) and C)

Question 9

The equation for the above saving schedule is:

Accepted Answer

A)   Yd = -20 + .8S.
B)   Yd = 20 + .2S.
C)   S = 20 + .8Yd.
D)   S = -20 + .2Yd.E) A) and D)
F) All of the above

Question 10

Suppose the consumption schedule is: C = 20 + .9Y, where C is consumption and Y is disposable income.
-Refer to the above 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 C)
F) A) and C)

Question 11

The saving schedule is drawn on the assumption that as income increases:

Accepted Answer

A)   saving will decline absolutely and as a percentage of income.
B)   saving will increase absolutely, but remain constant as a percentage of income.
C)   saving will increase absolutely, but decline as a percentage of income.
D)   saving will increase absolutely and as a percentage of income.E) None of the above
F) A) and D)

Question 12

Following is consumption schedules for three private closed economies. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars.
 
-Refer to the above data. Suppose that consumption increased 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 D)
F) C) and D)

Question 13

Suppose the government finds it can increase equilibrium real GDP by $45 billion by increasing government purchases by $18 billion. On the basis of this information we can say that the:

Accepted Answer

A)   MPS in this economy is .4.
B)   MPC in this economy is .4.
C)   MPC in this economy is .3
D)   multiplier is 3.E) A) and B)
F) A) and C)

Question 14

As disposable income goes up the:

Accepted Answer

A)   APC falls.
B)   APS falls.
C)   volume of consumption declines absolutely.
D)   volume of investment can be expected to diminish.E) None of the above
F) A) and B)

Question 15

-Refer to the above diagram. At disposable income level D, consumption:

Accepted Answer

A)   is equal to CD.
B)   is equal to OD minus CD.
C)   is equal to CD/OD.
D)   is equal to CD plus BD.E) A) and B)
F) All of the above

Question 16

3 only. C)  C1, C2, and C3 only. D)  C4 only." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram. The MPC is constant as income rises for:

Accepted Answer

A)   none of the consumption schedules shown.
B)   C3 only.
C)   C1, C2, and C3 only.
D)   C4 only.E) A) and C)
F) A) and B)

Question 17

The numerical value of the multiplier will be smaller the:

Accepted Answer

A)   larger the average propensity to consume.
B)   larger the slope of the saving schedule.
C)   larger the slope of the consumption schedule.
D)   smaller the slope of the saving schedule.E) B) and C)
F) A) and D)

Question 18

The following table illustrates the multiplier process in a private closed economy:
 
-Refer to the above table. The change in income in round two will be:

Accepted Answer

A)   $4.
B)   $16.
C)   $20.
D)   $24.E) B) and D)
F) A) and C)

Question 19

Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product. The multiplier for this economy:

Accepted Answer

A)   is 3.
B)   is 4.
C)   is 5.
D)   cannot be determined from the information given.E) A) and B)
F) B) and C)

Question 20

The simple multiplier applies:

Accepted Answer

A)   only when an inflationary gap exists.
B)   to shifts in the consumption and investment schedules.
C)   only to shifts in the investment schedule.
D)   only to shifts in the consumption schedule.E) None of the above
F) A) and B)

Exam 8: Basic Macroeconomic Relationships

Correct Answer
verified

Suppose the consumption schedule is: C = 20 + .9Y, where C is consumption and Y is disposable income. -Refer to the above data. At an $800 level of disposable income, the level of saving is:

Correct Answer
verified

Suppose the government finds it can increase equilibrium real GDP by $45 billion by increasing government purchases by $18 billion. On the basis of this information we can say that the:

Correct Answer
verified

The simple multiplier applies:

Correct Answer
verified

The following table illustrates the multiplier process in a private closed economy: -Refer to the above table. The change in income in round two will be:

Correct Answer
verified

The multiplier effect indicates that:

Correct Answer
verified

As aggregate income increases, the APC:

Correct Answer
verified

The numerical value of the multiplier will be smaller the:

Correct Answer
verified

The equation for the above saving schedule is:

Correct Answer
verified

-Refer to the above diagram. At disposable income level D, consumption:

Correct Answer
verified

The consumption schedule in the diagram below indicates that:

Correct Answer
verified

Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product. The multiplier for this economy:

Correct Answer
verified

-Refer to the above diagram. At income level F the volume of saving is:

Correct Answer
verified

As disposable income goes up the:

Correct Answer
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Refer to the data below. The MPS is:

Correct Answer
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The multiplier is useful in determining the:

Correct Answer
verified

-Refer to the above diagram. The MPC is constant as income rises for:

Correct Answer
verified

The saving schedule is drawn on the assumption that as income increases:

Correct Answer
verified

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

Correct Answer
verified

Which of the following relations is not correct?

Correct Answer
verified

Exam 8: Basic Macroeconomic Relationships

Correct AnswerverifiedShow Answer

Suppose the consumption schedule is: C = 20 + .9Y, where C is consumption and Y is disposable income. -Refer to the above data. At an $800 level of disposable income, the level of saving is:

Correct AnswerverifiedShow Answer

Suppose the government finds it can increase equilibrium real GDP by $45 billion by increasing government purchases by $18 billion. On the basis of this information we can say that the:

Correct AnswerverifiedShow Answer

The simple multiplier applies:

Correct AnswerverifiedShow Answer

The following table illustrates the multiplier process in a private closed economy: -Refer to the above table. The change in income in round two will be:

Correct AnswerverifiedShow Answer

The multiplier effect indicates that:

Correct AnswerverifiedShow Answer

As aggregate income increases, the APC:

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The numerical value of the multiplier will be smaller the:

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The equation for the above saving schedule is:

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-Refer to the above diagram. At disposable income level D, consumption:

Correct AnswerverifiedShow Answer

The consumption schedule in the diagram below indicates that:

Correct AnswerverifiedShow Answer

Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product. The multiplier for this economy:

Correct AnswerverifiedShow Answer

-Refer to the above diagram. At income level F the volume of saving is:

Correct AnswerverifiedShow Answer

As disposable income goes up the:

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Refer to the data below. The MPS is:

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The multiplier is useful in determining the:

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-Refer to the above diagram. The MPC is constant as income rises for:

Correct AnswerverifiedShow Answer

The saving schedule is drawn on the assumption that as income increases:

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

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Which of the following relations is not correct?

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