Question 1

An $18 billion increase in spending creates $18 billion of new income in the first round of the multiplier process and $13.5 billion in the second round. The multiplier in the economy is:

Accepted Answer

A)   2
B)   3
C)   4
D)   5

Question 2

There are only two things that people could do with their disposable income - spend it or save it.

Accepted Answer

A) True 
 B)False

Question 3

The fraction, or percentage, of total income which is saved is called the:

Accepted Answer

A)   Average propensity to save
B)   Marginal propensity to save
C)   Disposable income schedule
D)   Saving schedule

Question 4

The Paradox of Thrift highlights the idea that:

Accepted Answer

A)   Saving more is good for the economy in the short run
B)   Saving more can be bad for the economy during a recession
C)   In spending more, households will end up saving less
D)   In spending more, workers may end up losing their jobs

Question 5

Two basic determinants of investment spending are:

Accepted Answer

A)   Consumer spending and government spending
B)   Expected returns and real interest rates
C)   General price level and the level of output
D)   Domestic trade and international trade

Question 6

If Matt's disposable income increases from $4,000 to $4,500 and his level of saving increases from $200 to $325, it may be concluded that his marginal propensity to:

Accepted Answer

A)   Consume is .80
B)   Consume is .75
C)   Consume is .60
D)   Save is .30

Question 7

The marginal propensity to consume shows the fraction of any level of total income that is consumed.

Accepted Answer

A) True 
 B)False

Question 8

As disposable income decreases, the:

Accepted Answer

A)   Average propensity to consume increases
B)   Average propensity to consume decreases
C)   Level of consumption increases
D)   Level of saving increases

Question 9

Refer to the consumption schedule above. The average propensity to save at income level B is represented by:

Accepted Answer

A)   0C/0B
B)   EF/BE
C)   EF/BF
D)   DE/AB

Question 10

The disposable income (DI)  and consumption (C)  schedules are for a private, closed economy. All figures are in billions of dollars.  Refer to the data above. At the $320 billion level of disposable income, the average propensity to save is:

Accepted Answer

A)   .015
B)   .075
C)   .335
D)   .925

Question 11

Which of the following would shift the saving schedule upward?

Accepted Answer

A)   A decrease in wealth
B)   A decrease in real interest rates
C)   Consumer expectations of rising prices of products
D)   Increased optimism about future incomes

Question 12

One factor that shifts the consumption schedule is household wealth. Households build wealth by:

Accepted Answer

A)   Spending their current incomes
B)   Spending out of their future incomes
C)   Spending their incomes as they earn them
D)   Not spending all their current incomes

Question 13

Generally speaking, the greater the MPS, the:

Accepted Answer

A)   Smaller would be the increase in income which results from an increase in consumption spending
B)   Larger would be the increase in income which results from an increase in consumption spending
C)   Larger would be the increase in income which results from a decrease in consumption spending
D)   Smaller would be the increase in income which results from a decrease in consumption spending

Question 14

In an economy, for every $1600 decrease in income, spending falls by $1200. It can be concluded that the:

Accepted Answer

A)   Slope of the saving schedule is 1.33
B)   Slope of the saving schedule is 0.75
C)   Marginal propensity to consume is 1.33
D)   Marginal propensity to save is .25

Question 15

The MPC can be defined as the:

Accepted Answer

A)   Change in consumption divided by the change in income
B)   Change in income divided by the change in consumption
C)   Ratio of income to saving
D)   Ratio of saving to consumption

Question 16

A lower real interest rate typically induces consumers to:

Accepted Answer

A)   Save more
B)   Buy fewer imported goods
C)   Purchase more goods that are bought using credit
D)   Purchase fewer goods that are bought without using credit

Question 17

When consumers decide to increase household debt, this action will:

Accepted Answer

A)   Shift the consumption schedule upward
B)   Shift the consumption schedule downward
C)   Increase the amount consumed along a stable consumption schedule
D)   Decrease the amount consumed along a stable consumption schedule

Question 18

Suppose that new computer software for accounting and analysis at a business has a useful life of only one year and costs $200,000 before it needs to be upgraded to a new version. The revenue generated by this software is expected to be $250,000. The expected rate of return from this new computer software is:

Accepted Answer

A)   11 percent
B)   20 percent
C)   25 percent
D)   80 percent

Question 19

According to the cumulative investment table above, if the real interest rate falls from 20% to 16%, then:

Accepted Answer

A)   $180 billion of additional investments will be undertaken
B)   $330 billion of total investments will be undertaken
C)   $30 billion of additional investments will be undertaken
D)   $440 billion of total investments will be undertaken

Question 20

Answer the following question based on the table below which illustrates the multiplier process resulting from an autonomous increase in investment by $5.  Refer to the above table. The multiplier in this economy is:

Accepted Answer

A)   2
B)   3
C)   4
D)   5

Exam 10: Basic Macroeconomic Relationships

The fraction, or percentage, of total income which is saved is called the:

Correct Answer
verified

The disposable income (DI) and consumption (C) schedules are for a private, closed economy. All figures are in billions of dollars. Refer to the data above. At the $320 billion level of disposable income, the average propensity to save is:

Correct Answer
verified

There are only two things that people could do with their disposable income - spend it or save it.

Correct Answer
verified

The MPC can be defined as the:

Correct Answer
verified

The marginal propensity to consume shows the fraction of any level of total income that is consumed.

Correct Answer
verified

The Paradox of Thrift highlights the idea that:

Correct Answer
verified

If Matt's disposable income increases from $4,000 to $4,500 and his level of saving increases from $200 to $325, it may be concluded that his marginal propensity to:

Correct Answer
verified

According to the cumulative investment table above, if the real interest rate falls from 20% to 16%, then:

Correct Answer
verified

Two basic determinants of investment spending are:

Correct Answer
verified

Answer the following question based on the table below which illustrates the multiplier process resulting from an autonomous increase in investment by $5. Refer to the above table. The multiplier in this economy is:

Correct Answer
verified

An $18 billion increase in spending creates $18 billion of new income in the first round of the multiplier process and $13.5 billion in the second round. The multiplier in the economy is:

Correct Answer
verified

When consumers decide to increase household debt, this action will:

Correct Answer
verified

A lower real interest rate typically induces consumers to:

Correct Answer
verified

As disposable income decreases, the:

Correct Answer
verified

One factor that shifts the consumption schedule is household wealth. Households build wealth by:

Correct Answer
verified

Generally speaking, the greater the MPS, the:

Correct Answer
verified

In an economy, for every $1600 decrease in income, spending falls by $1200. It can be concluded that the:

Correct Answer
verified

Refer to the consumption schedule above. The average propensity to save at income level B is represented by:

Correct Answer
verified

Which of the following would shift the saving schedule upward?

Correct Answer
verified

Correct Answer
verified

Exam 10: Basic Macroeconomic Relationships

The fraction, or percentage, of total income which is saved is called the:

Correct AnswerverifiedShow Answer

The disposable income (DI) and consumption (C) schedules are for a private, closed economy. All figures are in billions of dollars. Refer to the data above. At the $320 billion level of disposable income, the average propensity to save is:

Correct AnswerverifiedShow Answer

There are only two things that people could do with their disposable income - spend it or save it.

Correct AnswerverifiedShow Answer

The MPC can be defined as the:

Correct AnswerverifiedShow Answer

The marginal propensity to consume shows the fraction of any level of total income that is consumed.

Correct AnswerverifiedShow Answer

The Paradox of Thrift highlights the idea that:

Correct AnswerverifiedShow Answer

If Matt's disposable income increases from $4,000 to $4,500 and his level of saving increases from $200 to $325, it may be concluded that his marginal propensity to:

Correct AnswerverifiedShow Answer

According to the cumulative investment table above, if the real interest rate falls from 20% to 16%, then:

Correct AnswerverifiedShow Answer

Two basic determinants of investment spending are:

Correct AnswerverifiedShow Answer

Answer the following question based on the table below which illustrates the multiplier process resulting from an autonomous increase in investment by $5. Refer to the above table. The multiplier in this economy is:

Correct AnswerverifiedShow Answer

An $18 billion increase in spending creates $18 billion of new income in the first round of the multiplier process and $13.5 billion in the second round. The multiplier in the economy is:

Correct AnswerverifiedShow Answer

When consumers decide to increase household debt, this action will:

Correct AnswerverifiedShow Answer

A lower real interest rate typically induces consumers to:

Correct AnswerverifiedShow Answer

As disposable income decreases, the:

Correct AnswerverifiedShow Answer

One factor that shifts the consumption schedule is household wealth. Households build wealth by:

Correct AnswerverifiedShow Answer

Generally speaking, the greater the MPS, the:

Correct AnswerverifiedShow Answer

In an economy, for every $1600 decrease in income, spending falls by $1200. It can be concluded that the:

Correct AnswerverifiedShow Answer

Refer to the consumption schedule above. The average propensity to save at income level B is represented by:

Correct AnswerverifiedShow Answer

Which of the following would shift the saving schedule upward?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified