Question 1

Which of the following is the primary explanation for most of the fluctuations in output and employment over the course of the business cycle?

Accepted Answer

A)  changes in net exports
B)  changes in the marginal propensity to consume
C)  abrupt changes in stock market prices
D)  changes in investment expenditures

Question 2

Refer to the above data.At the $100 level of income, the average propensity to save is:

Accepted Answer

A)  .10.
B)  .20.
C)  .25.
D)  .90.

Question 3

Which of the following is likely to be an effect of lower business taxes on the investment demand curve of an economy?

Accepted Answer

A)  A leftward shift of the curve
B)  A rightward shift of the curve
C)  An upward movement along the curve
D)  A downward movement along the curve

Question 4

1/2 percent. B) dissaving is $5. C) the average propensity to save is .20. D) the average propensity to consume is .80." class="answers-bank-image d-inline" rel="preload" > Refer to the above data.At the $200 level of disposable income:

Accepted Answer

A)  the marginal propensity to save is 21/2 percent.
B)  dissaving is $5.
C)  the average propensity to save is .20.
D)  the average propensity to consume is .80.

Question 5

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.

Question 6

For all levels of income to the left of the intersection of the 45-degree line and the consumption schedule, the APC is:

Accepted Answer

A)  greater than 100 percent.
B)  less than the APS.
C)  equal to the MPC.
D)  equal to 100 percent.

Question 7

The greater the MPC, the greater the multiplier.

Accepted Answer

A) True 
 B)False

Question 8

One can determine the amount of consumption at any level of total income 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.

Question 9

Assume that a machine, which has a useful life of only one year, costs $2,000.Also, assume that the difference between the estimated operating costs, which includes power and taxes, and the additional revenue from the output of this machine is expected to be $2,300.If the firm finds that it can borrow funds at an interest rate of 10 percent per annum, the firm should:

Accepted Answer

A)  not purchase the machine because the expected rate of return exceeds the cost of borrowing.
B)  purchase the machine because the expected rate of return exceeds the cost of borrowing.
C)  not purchase the machine because the cost of borrowing exceeds the expected rate of return.
D)  purchase the machine because the cost of borrowing exceeds the expected rate of return.

Question 10

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.

Question 11

d = -20 + .8S. B) Yd = 20 + .2S. C) S = 20 + .8Yd. D) S = -20 + .2Yd." class="answers-bank-image d-inline" rel="preload" > 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.

Question 12

The consumption schedule shows:

Accepted Answer

A)  that the MPC increases in proportion to GDP.
B)  that households consume more when interest rates are low.
C)  that consumption depends primarily upon the level of business investment.
D)  the amounts households plan or intend to consume at various possible levels of aggregate income.

Question 13

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.The marginal propensity to save:

Accepted Answer

A)  is highest in economy (1) .
B)  is highest in economy (2) .
C)  is highest in economy (3) .
D)  cannot be determined from the data given.

Question 14

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

Question 15

The MPC for an economy is:

Accepted Answer

A)  the slope of the consumption schedule or line.
B)  the slope of the savings schedule or line.
C)  1 divided by the slope of the consumption schedule or line.
D)  1 divided by the slope of the savings schedule or line.

Question 16

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.

Question 17

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)  $160

Question 18

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.

Question 19

Given the consumption schedule, it is possible to graph the relevant saving schedule by:

Accepted Answer

A)  subtracting the MPC from "one" at each level of income.
B)  subtracting investment from consumption at each level of GDP.
C)  plotting the horizontal differences between the consumption schedule and the 45-degree line.
D)  plotting the vertical differences between the consumption schedule and the 45-degree line.

Question 20

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)  a decline in the acquisition, maintenance and operating costs.
D)  an increase in business taxes.

Exam 10: B: Basic Macroeconomic Relationships

As aggregate income increases, the APC:

Correct Answer
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The consumption schedule shows:

Correct Answer
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For all levels of income to the left of the intersection of the 45-degree line and the consumption schedule, the APC is:

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

Correct 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:

Correct Answer
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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:

Correct Answer
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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.The marginal propensity to save:

Correct Answer
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Which of the following is the primary explanation for most of the fluctuations in output and employment over the course of the business cycle?

Correct Answer
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Given the consumption schedule, it is possible to graph the relevant saving schedule by:

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

Correct Answer
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Which of the following is likely to be an effect of lower business taxes on the investment demand curve of an economy?

Correct Answer
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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 Answer
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The equation for the above saving schedule is:

Correct Answer
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The greater the MPC, the greater the multiplier.

Correct Answer
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The MPC for an economy is:

Correct Answer
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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
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One can determine the amount of consumption at any level of total income by:

Correct Answer
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Refer to the above data.At the $200 level of disposable income:

Correct Answer
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Refer to the above data.At the $100 level of income, the average propensity to save is:

Correct Answer
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Exam 10: B: Basic Macroeconomic Relationships

As aggregate income increases, the APC:

Correct AnswerverifiedShow Answer

The consumption schedule shows:

Correct AnswerverifiedShow Answer

For all levels of income to the left of the intersection of the 45-degree line and the consumption schedule, the APC is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

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.The marginal propensity to save:

Correct AnswerverifiedShow Answer

Which of the following is the primary explanation for most of the fluctuations in output and employment over the course of the business cycle?

Correct AnswerverifiedShow Answer

Given the consumption schedule, it is possible to graph the relevant saving schedule by:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is likely to be an effect of lower business taxes on the investment demand curve of an economy?

Correct AnswerverifiedShow Answer

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

The equation for the above saving schedule is:

Correct AnswerverifiedShow Answer

The greater the MPC, the greater the multiplier.

Correct AnswerverifiedShow Answer

The MPC for an economy is:

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

One can determine the amount of consumption at any level of total income by:

Correct AnswerverifiedShow Answer

Refer to the above data.At the $200 level of disposable income:

Correct AnswerverifiedShow Answer

Refer to the above data.At the $100 level of income, the average propensity to save is:

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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