Question 1

If people become pessimistic about the state of the economy, the consumption function shifts upward.

Accepted Answer

A) True 
 B)False

Question 2

Exhibit 8-5 Consumption function  As shown in Exhibit 8-5, the marginal propensity to consume (MPC) is:

Accepted Answer

A)  0.25.
B)  0.50.
C)  0.75.
D)  0.90.

Question 3

The investment demand curve shows the amount businesses spend for investment goods at different possible:

Accepted Answer

A)  price levels.
B)  levels of GDP.
C)  rates of interest.
D)  levels of taxation.

Question 4

Exhibit 8-2 Consumption function  As shown in Exhibit 8-2, the marginal propensity to save (MPS) is:

Accepted Answer

A)  0.25.
B)  0.50.
C)  0.75.
D)  0.90.

Question 5

In the Keynesian aggregate expenditure model, the 45-degree line indicates:

Accepted Answer

A)  amounts households plan to spend at each possible level of income.
B)  amounts households plan to save at each possible level of income.
C)  all income levels at which the planned spending of decision makers equals total output.
D)  all income levels at which the marginal propensity to consume is one.

Question 6

Exhibit 8-10 Consumption function  In Exhibit 8-10, when disposable income is equal to zero, saving is equal to:

Accepted Answer

A)  $0.
B)  $100.
C)  - $50.
D)  - $100.
E)  $50.

Question 7

As shown in Exhibit 8-3, saving occurs:

Accepted Answer

A)  at 0.
B)  between 0 and $5 trillion.
C)  where real disposable income is greater than $5 trillion.
D)  at $5 trillion.

Question 8

Exhibit 8-13 Investment expenditures 1 to I2? A) Lower money holdings. B) Lower interest rates. C) Expectations of a future economic slow-down. D) Lower disposable income. E) Lower capacity utilization." class="answers-bank-image d-inline" rel="preload" > In Exhibit 8-13, which of the following could cause the shift from I1 to I2?

Accepted Answer

A)  Lower money holdings.
B)  Lower interest rates.
C)  Expectations of a future economic slow-down.
D)  Lower disposable income.
E)  Lower capacity utilization.

Question 9

Exhibit 8-4 Disposable income and consumption data
    
Note: All amounts are in billions of dollars per year. As shown in Exhibit 8-4, if disposable income is $400 billion, the marginal propensity to consume (MPC) is:

Accepted Answer

A)  0.00.
B)  0.25.
C)  0.75.
D)  1.00.

Question 10

Exhibit 8-10 Consumption function  In Exhibit 8-10, the value of the marginal propensity to consume is:

Accepted Answer

A)  .75.
B)  .80.
C)  .50.
D)  .25.
E)  .20.

Question 11

Exhibit 8-9 Aggregate expenditures function  In Exhibit 8-9, what is the households' marginal propensity to consume (MPC) ?

Accepted Answer

A)  0.5.
B)  0.67.
C)  0.75.
D)  0.80.

Question 12

Exhibit 8-4 Disposable income and consumption data     
Note: All amounts are in billions of dollars per year. As shown in Exhibit 8-4, if disposable income is $100 billion, the marginal propensity to consume (MPC) is:

Accepted Answer

A)  0.00.
B)  0.25.
C)  0.75.
D)  1.00.

Question 13

The vertical intercept of the consumption function that represents the portion of consumption expenditure not associated with a level of disposable income is known as:

Accepted Answer

A)  zero income intercept.
B)  disposable income intercept.
C)  autonomous consumption.
D)  automatic consumption line.

Question 14

The nation has its own MPC. When disposable income increases from $300 billion to $400 billion, national consumption increases from $300 billion to $360 billion. At Y = $400 billion, the MPC is:

Accepted Answer

A)  0.2.
B)  0.5.
C)  0.6.
D)  0.67.
E)  1.33.

Question 15

If the economy were left on its own without the interference of government or the Fed, it would move toward an equilibrium rate of growth that would produce, with only minor interruptions, full employment without inflation. What school supports this view?

Accepted Answer

A)  Classical.
B)  Keynesian.
C)  Monetarism.
D)  Supply-side.
E)  Neo-Keynesian.

Question 16

If your disposable income increases from $30,000 to $35,000 and your consumption increases from $11,000 to $12,000, your marginal propensity to consume (MPC) is:

Accepted Answer

A)  0.2.
B)  0.4.
C)  0.5.
D)  0.8.
E)  1.0.

Question 17

The marginal propensity to save plus the marginal propensity to consume always equals 1.

Accepted Answer

A) True 
 B)False

Question 18

If, for a given disposable income level, the disposable income line lies below the consumption curve, saving:

Accepted Answer

A)  equals consumption.
B)  equals disposable income.
C)  is less than zero.
D)  is equal to zero.
E)  is greater than zero.

Question 19

As shown in Exhibit 8-2, dissaving occurs:

Accepted Answer

A)  at $5 trillion.
B)  between 0 and $4 trillion.
C)  where disposable income is greater than $4 trillion.
D)  at $8 trillion.

Question 20

According to Keynes, what is the most important determinant of households' spending on goods and services?

Accepted Answer

A)  The price level.
B)  The interest rate.
C)  Autonomous consumption.
D)  Disposable income.

Exam 8: The Keynesian Model

The investment demand curve shows the amount businesses spend for investment goods at different possible:

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Exhibit 8-5 Consumption function As shown in Exhibit 8-5, the marginal propensity to consume (MPC) is:

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Exhibit 8-10 Consumption function In Exhibit 8-10, the value of the marginal propensity to consume is:

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Exhibit 8-9 Aggregate expenditures function In Exhibit 8-9, what is the households' marginal propensity to consume (MPC) ?

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The marginal propensity to save plus the marginal propensity to consume always equals 1.

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According to Keynes, what is the most important determinant of households' spending on goods and services?

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Exhibit 8-4 Disposable income and consumption data Note: All amounts are in billions of dollars per year. As shown in Exhibit 8-4, if disposable income is $100 billion, the marginal propensity to consume (MPC) is:

Correct AnswerverifiedShow Answer

Exhibit 8-10 Consumption function In Exhibit 8-10, when disposable income is equal to zero, saving is equal to:

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The nation has its own MPC. When disposable income increases from $300 billion to $400 billion, national consumption increases from $300 billion to $360 billion. At Y = $400 billion, the MPC is:

Correct AnswerverifiedShow Answer

In the Keynesian aggregate expenditure model, the 45-degree line indicates:

Correct AnswerverifiedShow Answer

Exhibit 8-4 Disposable income and consumption data Note: All amounts are in billions of dollars per year. As shown in Exhibit 8-4, if disposable income is $400 billion, the marginal propensity to consume (MPC) is:

Correct AnswerverifiedShow Answer

As shown in Exhibit 8-2, dissaving occurs:

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As shown in Exhibit 8-3, saving occurs:

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The vertical intercept of the consumption function that represents the portion of consumption expenditure not associated with a level of disposable income is known as:

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If, for a given disposable income level, the disposable income line lies below the consumption curve, saving:

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Exhibit 8-13 Investment expenditures In Exhibit 8-13, which of the following could cause the shift from I1 to I2?

Correct AnswerverifiedShow Answer

If people become pessimistic about the state of the economy, the consumption function shifts upward.

Correct AnswerverifiedShow Answer

If the economy were left on its own without the interference of government or the Fed, it would move toward an equilibrium rate of growth that would produce, with only minor interruptions, full employment without inflation. What school supports this view?

Correct AnswerverifiedShow Answer

If your disposable income increases from $30,000 to $35,000 and your consumption increases from $11,000 to $12,000, your marginal propensity to consume (MPC) is:

Correct AnswerverifiedShow Answer

Exhibit 8-2 Consumption function As shown in Exhibit 8-2, the marginal propensity to save (MPS) is:

Correct AnswerverifiedShow Answer

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Exhibit 8-13 Investment expenditures In Exhibit 8-13, which of the following could cause the shift from I₁to I₂?

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