Question 1

Answer the question on the basis of the following table that illustrates the multiplier process.  Refer to the given table.The multiplier in this economy is:

Accepted Answer

A)   2.
B)   4.
C)   5.
D)   10.

Question 2

Other things equal,a 10 percent decrease in corporate income taxes will:

Accepted Answer

A)   decrease the market price of real capital goods.
B)   have no effect on the location of the investment-demand curve.
C)   shift the investment-demand curve to the right.
D)   shift the investment-demand curve to the left. C

Question 3

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 on the level of business investment.
D)   the amounts households intend to consume at various possible levels of aggregate income.

Question 4

The most important determinant of consumer spending is:

Accepted Answer

A)   the level of household borrowing.
B)   consumer expectations.
C)   the stock of wealth.
D)   the level of income. D

Question 5

(Advanced analysis) If the equation C = 20 + .6Y,where C is consumption and Y is disposable income,were graphed:

Accepted Answer

A)   the vertical intercept would be +.6 and the slope would be +20.
B)   it would reveal an inverse relationship between consumption and disposable income.
C)   the vertical intercept would be negative,but consumption would increase as disposable income rises.
D)   the vertical intercept would be +20 and the slope would be +.6.

Question 6

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 7

The 45-degree line on a graph relating consumption and income shows:

Accepted Answer

A)   all the points where the MPC is constant.
B)   all the points at which saving and income are equal.
C)   all the points at which consumption and income are equal.
D)   the amounts households will plan to save at each possible level of income.

Question 8

A specific investment will be undertaken if the expected rate of return,r,exceeds the interest rate,i.

Accepted Answer

A) True 
 B)False

Question 9

Answer the question on the basis of the following table:   Expected Rate Amount of Investment With This  of Return (%) ‾ Rate of Return or Higher ($B) ‾12%$101020830640450260\begin{array}{l}	ext { Expected Rate Amount of Investment With This }\\begin{array} { c c c } \underline{	ext { of Return } ( \% )  }& \underline{	ext { Rate of Return or Higher } ( \$ B )  }\12\%& \$ 10 \10 & 20 \8 & 30 \6 & 40 \4 & 50 \2 & 60\end{array}\end{array} Expected Rate Amount of Investment With This  of Return (%) ​12%108642​ Rate of Return or Higher ($B) ​$102030405060​​  The given schedule indicates that if the real interest rate is 8 percent,then:

Accepted Answer

A)   we cannot tell what volume of investment will be profitable.
B)   $30 billion will be both saved and invested.
C)   $30 billion of investment will be undertaken.
D)   $60 billion of investment will be undertaken.

Question 10

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.The investment demand curve for this economy is:

Accepted Answer

A)   r‾I‾25%$10201515201025530035\begin{array}{l}\underline{r}&\underline{I} \25\%&\$10\20&15\15&20\10&25\5&30\0&35\end{array}r​25%20151050​I​$101520253035​ 
B)   r‾I‾25%$1020515101015520025\begin{array}{l}\underline{r}&\underline{I} \25\%&\$10\20&5\15&10\10&15\5&20\0&25\end{array}r​25%20151050​I​$10510152025​  
C)   r‾I‾20%$1015201030540050\begin{array}{l}\underline{r}&\underline{I} \20\%&\$10\15&20\10&30\5&40\0&50\end{array}r​20%151050​I​$1020304050​  
D)   r‾I‾25%$5201015151020525030\begin{array}{l}\underline{r}&\underline{I} \25\%&\$5\20&10\15&15\10&20\5&25\0&30\end{array}r​25%20151050​I​$51015202530​

Question 11

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:

Accepted Answer

A)   7.5 percent.
B)   10 percent.
C)   15 percent.
D)   20 percent.

Question 12

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

Accepted Answer

A)   the MPC equals 1.
B)   the APC is zero.
C)   saving equals income.
D)   saving is zero.

Question 13

The size of the multiplier is equal to the:

Accepted Answer

A)   slope of the consumption schedule.
B)   reciprocal of the slope of the consumption schedule.
C)   slope of the saving schedule.
D)   reciprocal of the slope of the saving schedule.

Question 14

Investment spending in the United States tends to be unstable because:

Accepted Answer

A)   profits are highly variable.
B)   the price level fluctuates rapidly.
C)   investment spending is affected by interest rates.
D)   capital wears out quickly and must be replaced often.

Question 15

A $1 billion increase in investment will cause a:

Accepted Answer

A)   (1/MPS) billion increase in GDP.
B)   (MPS) billion increase in GDP.
C)   (1 - MP
C)  billion increase in GDP.
D)   (MPC - MPS) billion increase in GDP. A

Question 16

Suppose that a new machine tool having a useful life of only one year costs $80,000.Suppose,also,that the net additional revenue resulting from buying this tool is expected to be $96,000.The expected rate of return on this tool is:

Accepted Answer

A)   80 percent.
B)   8 percent.
C)   2 percent.
D)   20 percent.

Question 17

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.  Refer to the given 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 18

The relationship between consumption and disposable income is such that:

Accepted Answer

A)   an inverse and stable relationship exists between consumption and income.
B)   a direct,but very volatile,relationship exists between consumption and income.
C)   a direct and relatively stable relationship exists between consumption and income.
D)   the two are usually equal.

Question 19

Which of the following is correct?

Accepted Answer

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

Question 20

Answer the question on the basis of the following table that illustrates the multiplier process.  Refer to the given table.The total change in income resulting from the initial change in investment will be:

Accepted Answer

A)   $100.
B)   $20.
C)   $80.
D)   $200.

Exam 29: Basic Macroeconomic Relationships

Answer the question on the basis of the following table that illustrates the multiplier process. Refer to the given table.The multiplier in this economy is:

Correct Answer
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Other things equal,a 10 percent decrease in corporate income taxes will:

Correct Answer
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C

The consumption schedule shows:

Correct Answer
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The most important determinant of consumer spending is:

Correct Answer
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D

(Advanced analysis) If the equation C = 20 + .6Y,where C is consumption and Y is disposable income,were graphed:

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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The 45-degree line on a graph relating consumption and income shows:

Correct Answer
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A specific investment will be undertaken if the expected rate of return,r,exceeds the interest rate,i.

Correct Answer
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Correct Answer
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Correct Answer
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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:

Correct Answer
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At the point where the consumption schedule intersects the 45-degree line:

Correct Answer
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The size of the multiplier is equal to the:

Correct Answer
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Investment spending in the United States tends to be unstable because:

Correct Answer
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A $1 billion increase in investment will cause a:

Correct Answer
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A

Suppose that a new machine tool having a useful life of only one year costs $80,000.Suppose,also,that the net additional revenue resulting from buying this tool is expected to be $96,000.The expected rate of return on this tool is:

Correct Answer
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Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the given data.The marginal propensity to save:

Correct Answer
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The relationship between consumption and disposable income is such that:

Correct Answer
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Which of the following is correct?

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 total change in income resulting from the initial change in investment will be:

Correct Answer
verified

Exam 29: Basic Macroeconomic Relationships

Answer the question on the basis of the following table that illustrates the multiplier process. Refer to the given table.The multiplier in this economy is:

Correct AnswerverifiedShow Answer

Other things equal,a 10 percent decrease in corporate income taxes will:

Correct AnswerverifiedC

The consumption schedule shows:

Correct AnswerverifiedShow Answer

The most important determinant of consumer spending is:

Correct AnswerverifiedD

(Advanced analysis) If the equation C = 20 + .6Y,where C is consumption and Y is disposable income,were graphed:

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

The 45-degree line on a graph relating consumption and income shows:

Correct AnswerverifiedShow Answer

A specific investment will be undertaken if the expected rate of return,r,exceeds the interest rate,i.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The size of the multiplier is equal to the:

Correct AnswerverifiedShow Answer

Investment spending in the United States tends to be unstable because:

Correct AnswerverifiedShow Answer

A $1 billion increase in investment will cause a:

Correct AnswerverifiedA

Suppose that a new machine tool having a useful life of only one year costs $80,000.Suppose,also,that the net additional revenue resulting from buying this tool is expected to be $96,000.The expected rate of return on this tool is:

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the given data.The marginal propensity to save:

Correct AnswerverifiedShow Answer

The relationship between consumption and disposable income is such that:

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following table that illustrates the multiplier process. Refer to the given table.The total change in income resulting from the initial change in investment will be:

Correct AnswerverifiedShow Answer

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C

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D

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A

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