Question 1

When the average propensity to save (APS) is 0.20,then this means

Accepted Answer

A)  people are spending 20 percent of their disposable income.
B)  people are spending 80 percent of their disposable income.
C)  people are saving $0.20 of the last dollar earned.
D)  people are spending 60 percent of their disposable income and investing the remaining 20 percent.

Question 2

An increase in the marginal propensity to save (MPS)

Accepted Answer

A)  increases the value of the multiplier.
B)  increases autonomous consumption.
C)  increases the marginal propensity to consume (MP
C)  .
D)  none of the above.

Question 3

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

Accepted Answer

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

Question 4

Because a decrease in real autonomous spending results in a ________ in the price level,the ultimate effect on real GDP is ________ that predicted by the multiplier.

Accepted Answer

A)  fall;smaller
B)  fall;larger
C)  rise;smaller
D)  fall,smaller

Question 5

-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 does planned real saving equal when real disposable income equals $6,000?

Accepted Answer

A)  -3,000
B)  -1,200
C)  0
D)  7,200

Question 6

The investment function is represented by

Accepted Answer

A)  an inverse relationship between the interest rate and the value of planned investment.
B)  the direct relationship between the interest rate and the value of planned investment.
C)  the direct relationship between taxes and government spending.
D)  the indirect relationship between taxes and government spending.

Question 7

Total planned expenditures in a closed economy are equal to

Accepted Answer

A)  consumption + investment + government expenditures.
B)  consumption + savings + transfers + investment.
C)  saving + investment + government expenditures.
D)  investment + saving + transfers.

Question 8

A rise in the price level causes

Accepted Answer

A)  an increase in aggregate demand.
B)  a decrease in aggregate demand.
C)  a reduction in total planned real expenditures.
D)  an increase in total planned real expenditures.

Question 9

-Refer to the above figure.If real disposable income is $30,000,saving is

Accepted Answer

A)  $0.
B)  $4000.
C)  $5000.
D)  $6000.

Question 10

According to Keynes,

Accepted Answer

A)  consumption is positively related to the interest rate.
B)  consumption is directly related to income but saving is inversely related to income.
C)  both consumption and saving are positively related to real disposable income.
D)  consumption is directly related to income but saving has no relationship with income.

Question 11

Suppose the marginal propensity to consume (MPC) is 0.9 and there is a $3,000 increase in planned investment.Given this information,real GDP will increase by

Accepted Answer

A)  $3,000.
B)  $2,700.
C)  $30,000.
D)  $3,333.

Question 12

It is conceivable that the APC,APS,MPC,and MPS could simultaneously be

Accepted Answer

A)  APC = 1.0;APS = 0.1;MPC = 0.8;MPS = 0.25.
B)  APC = 0.8;APS = 0.2;MPC = 1.1;MPS = 0.1.
C)  APC = 1.3;APS = -0.3;MPC = 0.9;MPS = 0.1.
D)  APC = 1.0;APS = 0;MPC = 1.0;MPS = 0.15.

Question 13

In economics,the term "autonomous" means

Accepted Answer

A)  existing independently.
B)  non-economic related.
C)  disposable income.
D)  cash payments.

Question 14

Planned expenditures equal real disposable income

Accepted Answer

A)  at every point on the consumption function.
B)  at every point on the saving function.
C)  at every point on the 45-degree line.
D)  when saving equals zero.

Question 15

The equation  is the

Accepted Answer

A)  average propensity to consume.
B)  average propensity to save.
C)  marginal propensity to consume.
D)  marginal propensity to save.

Question 16

One of the primary determinants of planned real investment spending is the

Accepted Answer

A)  expectation of future profits.
B)  rate of real consumption spending.
C)  rate of real government spending.
D)  rate of real saving.

Question 17

If the marginal propensity to save (MPS) increases,the multiplier

Accepted Answer

A)  decreases.
B)  increases.
C)  stays the same.
D)  can either increase or decrease,depending on what happens to the marginal propensity to consume (MP
C)  .

Question 18

As real disposable income increases,consumption expenditures

Accepted Answer

A)  increase by the same amount.
B)  increase by a smaller amount.
C)  increase by a larger amount.
D)  remain constant.

Question 19

Aging baby-boomers,predisposed to hearing loss because of years of listening to loud music,are now approaching the age range in which hearing loss starts to become apparent.What effect does this have on investment spending within the hearing aid industry?

Accepted Answer

A)  There will no longer be an opportunity cost associated with investment spending.
B)  There will be no change in real investment spending,because hearing aid manufacturers will look only at the interest rate in determining whether to expand production.
C)  The investment function relating planned real investment spending to the interest rate can be expected to shift rightward.
D)  The investment function relating planned real investment spending to the interest rate can be expected to shift leftward.

Question 20

A permanent increase in autonomous investment causes

Accepted Answer

A)  a more than proportional increase in real Gross Domestic Product (GDP) .
B)  a proportional increase in real Gross Domestic Product (GDP) .
C)  a less than proportional increase in real Gross Domestic Product (GDP) .
D)  an offsetting change in saving that leaves real Gross Domestic Product (GDP) at the same level.

Exam 12: Consumption, real GDP, and the Multiplier

Suppose the marginal propensity to consume (MPC) is 0.9 and there is a $3,000 increase in planned investment.Given this information,real GDP will increase by

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One of the primary determinants of planned real investment spending is the

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In economics,the term "autonomous" means

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The equation is the

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According to Keynes,

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Because a decrease in real autonomous spending results in a ________ in the price level,the ultimate effect on real GDP is ________ that predicted by the multiplier.

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As real disposable income increases,consumption expenditures

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Total planned expenditures in a closed economy are equal to

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A rise in the price level causes

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If the marginal propensity to save (MPS) increases,the multiplier

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An increase in the marginal propensity to save (MPS)

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-Refer to the above figure.If real disposable income is $30,000,saving is

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

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It is conceivable that the APC,APS,MPC,and MPS could simultaneously be

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A permanent increase in autonomous investment causes

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The investment function is represented by

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Aging baby-boomers,predisposed to hearing loss because of years of listening to loud music,are now approaching the age range in which hearing loss starts to become apparent.What effect does this have on investment spending within the hearing aid industry?

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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 does planned real saving equal when real disposable income equals $6,000?

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When the average propensity to save (APS) is 0.20,then this means

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Planned expenditures equal real disposable income

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Because a decrease in real autonomous spending results in a in the price level,the ultimate effect on real GDP is that predicted by the multiplier.

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