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Exam 10: Basic Macroeconomic Relationships

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Question 111

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As disposable income goes up, the

A) average propensity to consume falls.
B) average propensity to save falls.
C) volume of consumption declines absolutely.
D) volume of investment diminishes.

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Question 112

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Refer to the diagram. Which of the following would shift the investment demand curve from ID1 to ID2?

A) a lower interest rate
B) lower expected rates of return on investment
C) a higher interest rate
D) higher expected rates of return on investment

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Question 113

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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

The saving schedule is such that as aggregate income increases by a certain amount, saving

The investment demand curve suggests that

The relationship between consumption and disposable income is such that

$\begin{array} { | c | c | } \hline \text { Expected Rate of Return (\%) } & \begin{array} { c } \text { Amount of Investment With This Rate of Return } \\\text { or Higher (\$B) }\end{array} \\\hline 12 \% & \$ 10 \\\hline 10 & 20 \\\hline 8 & 30 \\\hline 6 & 40 \\\hline 4 & 50 \\\hline 2 & 60 \\\hline\end{array}$ The investment schedule in the given table indicates that if the real interest rate is 8 percent, then

(Advanced analysis) Refer to the diagram. The equation for the consumption schedule is

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

The figure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the largest multiplier?

Refer to the given diagram. The marginal propensity to save is equal to

Suppose the economy's saving schedule shifts from S1 to S2, as shown in the given diagram. We can say that its

Refer to the given graph. A movement from b to a along C1 might be caused by a(n)

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

Refer to the consumption schedule shown in the graph. At income level 3, the amount of saving is represented by the line segment

If the saving schedule is a straight line, the

Assume that for the entire business sector of a private closed economy, there are $0 worth of investment projects that will yield an expected rate of return of 25 percent or more. But there are $15 Worth of investments that will yield an expected rate of return of 20-25 percent, another $15 with an Expected rate of return of 15-20 percent, and an additional $15 of investment projects in each Successive rate of return range down to and including the 0-5 percent range. If the real interest rate is 15 percent, what amount of investment will be undertaken?

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

In annual percentage terms, investment spending in the United States is

Assume a machine that has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is Expected to be $2,300. The expected rate of return on this machine is