Question 1

An increase in taxes will shift both the consumption schedule and the saving schedule down.

Accepted Answer

A) True 
 B)False

Question 2

A specific investment will be undertaken if the expected rate of return, r, exceeds the interest rate, i.

Accepted Answer

A) True 
 B)False

Question 3

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

Question 4

If the MPC is 0.8, what change in investment spending is required to effect a total change in income by $60 billion?

Accepted Answer

A)  $12 billion
B)  $15 billion
C)  $20 billion
D)  $25 billionE) B) and C)
F) A) and D) A

Question 5

The practical significance of the multiplier is that it

Accepted Answer

A)  equates the real interest rate and the expected rate of return on investment.
B)  magnifies initial changes in spending into larger changes in GDP.
C)  keeps inflation within tolerable limits.
D)  helps to stabilize the economy.E) B) and D)
F) B) and C) B

Question 6

(Advanced analysis)  Assume the following consumption schedule: C = 20 + 0.9Y, where C is consumption and Y is disposable income.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

Question 7

Dissaving means

Accepted Answer

A)  the same thing as disinvesting.
B)  that households are spending more than their current incomes.
C)  that saving and investment are equal.
D)  that disposable income is less than zero.E) B) and D)
F) C) and D)

Question 8

If households consume less at each level of disposable income, they are

Accepted Answer

A)  saving more.
B)  saving less.
C)  spending more.
D)  working less.E) None of the above
F) All of the above A

Question 9

If households in the economy save more of any extra income that they earn, then the multiplier effect will

Accepted Answer

A)  increase.
B)  decrease.
C)  be unaffected.
D)  become less than 1.0.E) All of the above
F) B) and C)

Question 10

Assume there are no investment projects that will produce an expected rate of return of 8 percent or more.There are, however, $2 billion worth of investment projects with an expected rate of return at 7 percent, and an additional $2 billion for every drop of the interest rate by 1 percent.If the real interest rate is 3 percent in this economy, the cumulative amount of investment at the 3 percent or higher rate of return is

Accepted Answer

A)  $10 billion.
B)  $8 billion.
C)  $6 billion.
D)  $4 billion.E) None of the above
F) C) and D)

Question 11

Assume there are no prospective investment projects (I)  that will yield an expected rate of return (r)  of 25 percent or more, but there are $5 billion of investment opportunities with an expected rate of return between 20 and 25 percent, an additional $5 billion between 15 and 20 percent, and so on.The investment demand curve for this economy is shown in which table?

Accepted Answer

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

Question 12

At the point where the consumption schedule intersects the 45-degree line,

Accepted Answer

A)  the MPC is 1.00.
B)  the APC is 1.00.
C)  saving is equal to consumption.
D)  the economy is in equilibrium.E) All of the above
F) B) and C)

Question 13

In general, the steeper the consumption schedule, the

Accepted Answer

A)  smaller is the marginal propensity to consume.
B)  greater is the marginal propensity to save.
C)  smaller is the multiplier.
D)  larger is the multiplier.E) A) and B)
F) A) and C)

Question 14

There are only two things that people can do with their disposable income-spend it or save it.

Accepted Answer

A) True 
 B)False

Question 15

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 D)
F) None of the above

Question 16

Suppose a family's consumption exceeds its disposable income.This means that its

Accepted Answer

A)  MPC is greater than 1.
B)  MPS is negative.
C)  APC is greater than 1.
D)  APS is positive.E) B) and C)
F) A) and D)

Question 17

The APC can be defined as the fraction of a

Accepted Answer

A)  change in income that is not spent.
B)  change in income that is spent.
C)  specific level of total income that is not consumed.
D)  specific level of total income that is consumed.E) A) and B)
F) B) and D)

Question 18

If consumers expect prices to rise and shortages to occur in the future, then there will be a shift

Accepted Answer

A)  upward of both the consumption and saving schedules.
B)  downward of both the consumption and saving schedules.
C)  of the consumption schedule upward and of the saving schedule downward.
D)  of the consumption schedule downward and the saving schedule upward.E) B) and D)
F) A) and D)

Question 19

Which of the following will not cause the consumption schedule to shift?

Accepted Answer

A)  a sharp increase in the amount of wealth held by households
B)  a change in consumer incomes
C)  the expectation of a recession
D)  a growing expectation that consumer durables will be in short supplyE) C) and D)
F) B) and C)

Question 20

If the consumption schedule is a straight line, it can be concluded that the

Accepted Answer

A)  APC is necessarily constant.
B)  MPC is zero.
C)  MPC is constant at various levels of income.
D)  APC is equal to the MPC.E) B) and C)
F) B) and D)

Exam 30: Basic Macroeconomic Relationships

An increase in taxes will shift both the consumption schedule and the saving schedule down.

Correct Answer
verified

A specific investment will be undertaken if the expected rate of return, r, exceeds the interest rate, i.

Correct Answer
verified

The numerical value of the multiplier will be smaller the

Correct Answer
verified

If the MPC is 0.8, what change in investment spending is required to effect a total change in income by $60 billion?

Correct Answer
verified
A

The practical significance of the multiplier is that it

Correct Answer
verified
B

(Advanced analysis) Assume the following consumption schedule: C = 20 + 0.9Y, where C is consumption and Y is disposable income.At an $800 level of disposable income, the level of saving is

Correct Answer
verified

Dissaving means

Correct Answer
verified

If households consume less at each level of disposable income, they are

Correct Answer
verified
A

If households in the economy save more of any extra income that they earn, then the multiplier effect will

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

At the point where the consumption schedule intersects the 45-degree line,

Correct Answer
verified

In general, the steeper the consumption schedule, the

Correct Answer
verified

There are only two things that people can do with their disposable income-spend it or save it.

Correct Answer
verified

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

Correct Answer
verified

Suppose a family's consumption exceeds its disposable income.This means that its

Correct Answer
verified

The APC can be defined as the fraction of a

Correct Answer
verified

If consumers expect prices to rise and shortages to occur in the future, then there will be a shift

Correct Answer
verified

Which of the following will not cause the consumption schedule to shift?

Correct Answer
verified

If the consumption schedule is a straight line, it can be concluded that the

Correct Answer
verified

Exam 30: Basic Macroeconomic Relationships

An increase in taxes will shift both the consumption schedule and the saving schedule down.

Correct AnswerverifiedShow Answer

A specific investment will be undertaken if the expected rate of return, r, exceeds the interest rate, i.

Correct AnswerverifiedShow Answer

The numerical value of the multiplier will be smaller the

Correct AnswerverifiedShow Answer

If the MPC is 0.8, what change in investment spending is required to effect a total change in income by $60 billion?

Correct AnswerverifiedA

The practical significance of the multiplier is that it

Correct AnswerverifiedB

(Advanced analysis) Assume the following consumption schedule: C = 20 + 0.9Y, where C is consumption and Y is disposable income.At an $800 level of disposable income, the level of saving is

Correct AnswerverifiedShow Answer

Dissaving means

Correct AnswerverifiedShow Answer

If households consume less at each level of disposable income, they are

Correct AnswerverifiedA

If households in the economy save more of any extra income that they earn, then the multiplier effect will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

At the point where the consumption schedule intersects the 45-degree line,

Correct AnswerverifiedShow Answer

In general, the steeper the consumption schedule, the

Correct AnswerverifiedShow Answer

There are only two things that people can do with their disposable income-spend it or save it.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose a family's consumption exceeds its disposable income.This means that its

Correct AnswerverifiedShow Answer

The APC can be defined as the fraction of a

Correct AnswerverifiedShow Answer

If consumers expect prices to rise and shortages to occur in the future, then there will be a shift

Correct AnswerverifiedShow Answer

Which of the following will not cause the consumption schedule to shift?

Correct AnswerverifiedShow Answer

If the consumption schedule is a straight line, it can be concluded that the

Correct AnswerverifiedShow Answer

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A

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B

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A

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