Question 1

Investment spending is

Accepted Answer

A)  directly related to the interest rate.
B)  inversely related to the interest rate.
C)  directly related to real disposable income.
D)  inversely related to real disposable income.

Question 2

A situation in which spending exceeds income is

Accepted Answer

A)  the consumption function.
B)  the saving function.
C)  average propensity to save.
D)  dissaving.

Question 3

If saving equals $200 when real disposable income equals $1,000, the break-even income is

Accepted Answer

A)  less than $1,000.
B)  greater than $1,000.
C)  equal to $1,000.
D)  equal to $1,200.

Question 4

The marginal propensity to consume (MPC) can best be defined as that fraction of

Accepted Answer

A)  real disposable income that is consumed.
B)  real disposable income that is not consumed.
C)  a change in real disposable income that is spent.
D)  a change in real disposable income that is saved.

Question 5

-Refer to the above figure. Point B

Accepted Answer

A)  equals autonomous consumption.
B)  equals autonomous consumption plus autonomous consumption plus planned investment plus autonomous government spending plus autonomous net exports.
C)  has no special significance.
D)  equals government expenditures.

Question 6

Government purchases

Accepted Answer

A)  are determined by the public.
B)  are determined by the political process.
C)  are influenced by interest rates.
D)  are determined by suppliers.

Question 7

At the point at which the consumption function intersects the 45 degree reference line

Accepted Answer

A)  planned real consumption equals real disposable income.
B)  equilibrium output is supply determined equilibrium output is determined by both.
C)  planned real saving equals real disposable income.
D)  planned real consumption of real disposable income equals zero.

Question 8

-Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. The break-even level of real disposable income is

Accepted Answer

A)  0.
B)  6,000.
C)  10,000.
D)  14,000.

Question 9

-Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. What is the value of the average propensity to save equal when real disposable income equals $14,000?

Accepted Answer

A)  0.09
B)  0.7
C)  0.91
D)  1.1

Question 10

If the marginal propensity to consume (MPC) is 0.8, the multiplier is

Accepted Answer

A)  5.0.
B)  1.2.
C)  0.2.
D)  0.8.

Question 11

-In the above table, saving equals zero when real disposable income equals

Accepted Answer

A)  $0.
B)  $200.
C)  $300.
D)  $500.

Question 12

If real disposable income increases, the average propensity to save will

Accepted Answer

A)  initially increase, and then decrease.
B)  remain constant.
C)  increase.
D)  decrease.

Question 13

Which of the following is FALSE?

Accepted Answer

A)  APC + MPS = 1
B)  MPC + MPS = 1
C)  1 - APC = APS
D)  APC + APS = 1

Question 14

The average propensity to save (APS) is

Accepted Answer

A)  the rate at which real savings changes over time.
B)  the percentage of real disposable income saved.
C)  the difference between the amounts of real disposable income consumed and saved.
D)  the percentage of additional real disposable income that will go toward real saving.

Question 15

-Consider the above figure. The equation for the saving function is

Accepted Answer

A)  S = 40 - 0.67 Yd.
B)  S = 40 + 0.33 Yd.
C)  S = -40 + 0.67 Yd.
D)  S = -40 - 0.33 Yd.

Question 16

The size of the multiplier depends on

Accepted Answer

A)  the level of autonomous investment.
B)  the marginal propensity to consume.
C)  the level of net exports.
D)  the level of autonomous consumption.

Question 17

Which of the following is a simplifying assumption associated with the short-run Keynesian model of equilibrium real Gross Domestic Product (GDP) determination?

Accepted Answer

A)  Gross private domestic investment exceeds net private domestic investment.
B)  Most business profits are distributed to shareholders.
C)  Businesses pay indirect taxes.
D)  There is no depreciation.

Question 18

The arithmetic value of (1 - MPC) equals

Accepted Answer

A)  APC.
B)  MPS.
C)  APS.
D)  NDP.

Question 19

Which of the following is TRUE?

Accepted Answer

A)  APC + MPS = 1
B)  MPC + MPS = 1
C)  1 + APC = APS
D)  APC - APS = 1

Question 20

According to Keynes, real saving and real consumption spending are functions of

Accepted Answer

A)  economic expectations.
B)  an individual's future earning potential.
C)  current educational attainment.
D)  current real disposable income.

Exam 11: Consumption, Real GDP, and the Multiplier

If the marginal propensity to consume (MPC) is 0.8, the multiplier is

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-In the above table, saving equals zero when real disposable income equals

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-Refer to the above figure. Point B

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Investment spending is

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-Consider the above figure. The equation for the saving function is

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Which of the following is FALSE?

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The marginal propensity to consume (MPC) can best be defined as that fraction of

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At the point at which the consumption function intersects the 45 degree reference line

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If saving equals $200 when real disposable income equals $1,000, the break-even income is

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-Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. What is the value of the average propensity to save equal when real disposable income equals $14,000?

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If real disposable income increases, the average propensity to save will

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The size of the multiplier depends on

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Which of the following is a simplifying assumption associated with the short-run Keynesian model of equilibrium real Gross Domestic Product (GDP) determination?

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A situation in which spending exceeds income is

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Which of the following is TRUE?

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Government purchases

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The arithmetic value of (1 - MPC) equals

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-Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. The break-even level of real disposable income is

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According to Keynes, real saving and real consumption spending are functions of

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The average propensity to save (APS) is

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