Question 1

The slope of the consumption schedule is measured by the MPC.

Accepted Answer

A) True 
 B)False

Question 2

The consumption schedule is drawn on the assumption that as disposable income increases consumption will:

Accepted Answer

A)  be unaffected.
B)  increase absolutely, but remain constant as a percentage of income.
C)  increase absolutely, but decline as a percentage of income.
D)  increase absolutely and as a percentage of income.E) A) and D)
F) B) and C)

Question 3

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

Question 4

The reverse wealth effect will cause the consumption schedule to:

Accepted Answer

A)  shift upward.
B)  shift downward.
C)  not change at all.
D)  shift in the same direction as would occur with the wealth effect.E) C) and D)
F) A) and B)

Question 5

Other things equal, the real interest rate and the level of investment are:

Accepted Answer

A)  related only when saving equals planned investment.
B)  unrelated.
C)  inversely related.
D)  directly related.E) B) and D)
F) None of the above

Question 6

Suppose that a new machine tool having a useful life of only one year costs $80,000.Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000.The expected rate of return on this tool is:

Accepted Answer

A)  80 percent.
B)  8 percent.
C)  2 percent.
D)  20 percent.E) None of the above
F) All of the above

Question 7

If the equation for the consumption schedule is C = 20 + 0.8Y, where C is consumption and Y is disposable income, then the average propensity to consume is 1 when disposable income is:

Accepted Answer

A)  $80
B)  $100
C)  $120
D)  $160E) A) and B)
F) A) and C)

Question 8

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 APC must be equal at all levels of income.E) B) and D)
F) A) and C)

Question 9

Refer to the above data.The slope of the saving schedule is:

Accepted Answer

A)  .80.
B)  .10.
C)  .20.
D)  .15.E) A) and B)
F) None of the above

Question 10

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

Accepted Answer

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

Question 11

Assume the saving schedule for a private closed economy is S = -20 + 0.2Y, where S is saving 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) B) and C)
F) A) and C)

Question 12

If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inflation rate is:

Accepted Answer

A)  18 percent.
B)  24 percent.
C)  12 percent.
D)  6 percent.E) C) and D)
F) A) and C)

Question 13

If the equation C = 20 + .6Y, where C is consumption and Y is disposable income, were graphed:

Accepted Answer

A)  the vertical intercept would be +.6 and the slope would be +20.
B)  it would reveal an inverse relationship between consumption and disposable income.
C)  the vertical intercept would be negative, but consumption would increase as disposable income rises.
D)  the vertical intercept would be +20 and the slope would be +.6.E) C) and D)
F) B) and D)

Question 14

If the inflation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is:

Accepted Answer

A)  2 percent.
B)  zero percent.
C)  10 percent.
D)  22 percent.E) C) and D)
F) B) and D)

Question 15

If the real interest rate in the economy is i and the expected rate of return from additional investment is r, then more investment will be forthcoming when:

Accepted Answer

A)  r is greater than i.
B)  i is greater than r.
C)  r falls.
D)  i rises.E) B) and C)
F) A) and B)

Question 16

Suppose the economy's saving schedule shifts from S1to S2as shown in the below diagram.We can say that its: 1to S2as shown in the below diagram.We can say that its:   A) MPC has increased. B) MPS has increased. C) APS has increased at all levels of disposable income. D) APS has decreased at all levels of disposable income." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  MPC has increased.
B)  MPS has increased.
C)  APS has increased at all levels of disposable income.
D)  APS has decreased at all levels of disposable income.E) B) and D)
F) None of the above

Question 17

The above table reflects a(n) :

Accepted Answer

A)  interest rate schedule.
B)  demand-for-money schedule.
C)  investment-demand schedule.
D)  profit schedule.E) A) and D)
F) All of the above

Question 18

The wealth effect will tend to decrease consumption and increase saving.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is correct?

Accepted Answer

A)  MPC + MPS = APC + APS
B)  APC + MPS = APS + MPC
C)  APC + MPC = APS + MPS
D)  APC - APS = MPC - MPSE) A) and B)
F) B) and C)

Question 20

A decline in disposable income:

Accepted Answer

A)  increases consumption by moving upward along a specific consumption schedule.
B)  decreases consumption because it shifts the consumption schedule downward.
C)  decreases consumption by moving downward along a specific consumption schedule.
D)  increases consumption because it shifts the consumption schedule upward.E) A) and B)
F) A) and C)

Exam 10: Part B: Basic Macroeconomic Relationships

Other things equal, the real interest rate and the level of investment are:

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If the real interest rate in the economy is i and the expected rate of return from additional investment is r, then more investment will be forthcoming when:

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The consumption schedule is drawn on the assumption that as disposable income increases consumption will:

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Which of the following is correct?

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The above table reflects a(n) :

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If the inflation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is:

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The wealth effect will tend to decrease consumption and increase saving.

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Refer to the above diagram.The MPC and APC are both constant as income increases for:

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The reverse wealth effect will cause the consumption schedule to:

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Assume the saving schedule for a private closed economy is S = -20 + 0.2Y, where S is saving and Y is gross domestic product.The multiplier for this economy:

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Suppose the economy's saving schedule shifts from S1to S2as shown in the below diagram.We can say that its:

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A decline in disposable income:

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If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inflation rate is:

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If the equation for the consumption schedule is C = 20 + 0.8Y, where C is consumption and Y is disposable income, then the average propensity to consume is 1 when disposable income is:

Correct AnswerverifiedShow Answer

Suppose that a new machine tool having a useful life of only one year costs $80,000.Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000.The expected rate of return on this tool is:

Correct AnswerverifiedShow Answer

Which of the following relations is not correct?

Correct AnswerverifiedShow Answer

Refer to the above data.The slope of the saving schedule is:

Correct AnswerverifiedShow Answer

If the equation C = 20 + .6Y, where C is consumption and Y is disposable income, were graphed:

Correct AnswerverifiedShow Answer

The slope of the consumption schedule is measured by the MPC.

Correct AnswerverifiedShow Answer

The consumption schedule is such that:

Correct AnswerverifiedShow Answer

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Suppose the economy's saving schedule shifts from S₁to S₂as shown in the below diagram.We can say that its:

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