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

Question 2

The consumption schedule is drawn on the assumption that as 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 both absolutely and as a percentage of income.E) B) and C)
F) None of the above

Question 3

A rightward shift of the investment demand curve might be caused by:

Accepted Answer

A)   an increase in the price level.
B)   a decline in the real interest rate.
C)   businesses planning to increase their stock of inventories.
D)   an increase in business taxes.E) A) and D)
F) A) and C)

Question 4

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

Accepted Answer

A)   .5.
B)   .75.
C)   .8.
D)   .9.E) C) and D)
F) A) and B)

Question 5

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.If plotted on a graph,the slope of the saving schedule would be:

Accepted Answer

A)   .80.
B)   .10.
C)   .20.
D)   .15. E) B) and D)
F) B) and C)

Question 6

The average propensity to consume is defined as income divided by consumption.

Accepted Answer

A) True 
 B)False

Question 7

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 spending will change aggregate income by a larger amount.
C)   a change in spending will increase aggregate income by the same amount.
D)   an increase in total income will generate a larger change in aggregate expenditures.E) B) and C)
F) A) and D)

Question 8

If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round,the multiplier in the economy is:

Accepted Answer

A)   2.
B)   3.33.
C)   5.
D)   10.E) None of the above
F) All of the above

Question 9

One can determine the amount of any level of total income that is consumed by:

Accepted Answer

A)   multiplying total income by the slope of the consumption schedule.
B)   multiplying total income by the APC.
C)   subtracting the MPS from total income.
D)   multiplying total income by the MPC.E) C) and D)
F) B) and D)

Question 10

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 supply.E) C) and D)
F) None of the above

Question 11

Other things equal,if the real interest rate falls and business taxes rise:

Accepted Answer

A)   investment will rise until it is equal to saving.
B)   we will be uncertain as to the resulting change in investment.
C)   we can be certain that investment will rise.
D)   we can be certain that investment will fall.E) A) and B)
F) C) and D)

Question 12

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.If the real interest rate is 15 percent in this economy,the aggregate amount of investment will be:

Accepted Answer

A)   $25.
B)   $20.
C)   $15.
D)   $10.E) B) and D)
F) B) and C)

Question 13

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

Accepted Answer

A)   the availability of excess production capacity.
B)   an increase in business taxes.
C)   businesses becoming more optimistic about future business conditions.
D)   an increase in the real interest rate.E) B) and D)
F) B) and C)

Question 14

The multiplier effect means that:

Accepted Answer

A)   consumption is typically several times as large as saving.
B)   a change in consumption can cause a larger increase in investment.
C)   an increase in investment can cause GDP to change by a larger amount.
D)   a decline in the MPC can cause GDP to rise by several times that amount.E) A) and B)
F) None of the above

Question 15

If the MPC is constant at various levels of income,then the APC must also be constant at all of those income levels.

Accepted Answer

A) True 
 B)False

Question 16

As disposable income increases,consumption:

Accepted Answer

A)   and saving both increase.
B)   and saving both decrease.
C)   decreases and saving increases.
D)   increases and saving decreases.E) None of the above
F) All of the above

Question 17

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

Question 18

As disposable income goes up,the:

Accepted Answer

A)   average propensity to consume falls.
B)   average propensity to save falls.
C)   volume of consumption declines absolutely.
D)   volume of investment diminishes.E) None of the above
F) A) and B)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 29: Basic Macroeconomic Relationships

As disposable income goes up,the:

Correct Answer
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If the MPC is constant at various levels of income,then the APC must also be constant at all of those income levels.

Correct Answer
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The consumption and saving schedules reveal that the:

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

Correct Answer
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As disposable income increases,consumption:

Correct Answer
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A rightward shift of the investment demand curve might be caused by:

Correct Answer
verified

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

Correct Answer
verified

Other things equal,if the real interest rate falls and business taxes rise:

Correct Answer
verified

If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round,the multiplier in the economy is:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
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Art Buchwald's article "Squaring the Economic Circle" is a humorous description of:

Correct Answer
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The average propensity to consume is defined as income divided by consumption.

Correct Answer
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The multiplier effect means that:

Correct Answer
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The multiplier effect indicates that:

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

Correct Answer
verified

One can determine the amount of any level of total income that is consumed by:

Correct Answer
verified

Correct Answer
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A decline in the real interest rate will:

Correct Answer
verified

Exam 29: Basic Macroeconomic Relationships

As disposable income goes up,the:

Correct AnswerverifiedShow Answer

If the MPC is constant at various levels of income,then the APC must also be constant at all of those income levels.

Correct AnswerverifiedShow Answer

The consumption and saving schedules reveal that the:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

As disposable income increases,consumption:

Correct AnswerverifiedShow Answer

A rightward shift of the investment demand curve might be caused by:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things equal,if the real interest rate falls and business taxes rise:

Correct AnswerverifiedShow Answer

If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round,the multiplier in the economy is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Art Buchwald's article "Squaring the Economic Circle" is a humorous description of:

Correct AnswerverifiedShow Answer

The average propensity to consume is defined as income divided by consumption.

Correct AnswerverifiedShow Answer

The multiplier effect means that:

Correct AnswerverifiedShow Answer

The multiplier effect indicates that:

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 consume is:

Correct AnswerverifiedShow Answer

One can determine the amount of any level of total income that is consumed by:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A decline in the real interest rate will:

Correct AnswerverifiedShow Answer

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