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Exam 10: Basic Macroeconomic Relationships

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Question 21

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

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Question 22

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The actual multiplier effect in the U.S. economy is less than the multiplier effect in the text examples because

A) the real-world MPS is larger than the MPS in the examples.
B) in addition to saving, households use some of any increase in income to buy imported goods and to pay additional taxes.
C) the gap between the nominal interest rate and the real interest rate widens as the economy expands or contracts.
D) the MPC in the United States is greater than 1.

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Question 23

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A decline in disposable income

$\begin{array} { | c | c | } \hline \text { Disposable Income } & \text { Consumption } \\\hline \$ 300 & \$ 310 \\\hline 350 & 340 \\\hline 400 & 370 \\\hline 450 & 400 \\\hline 500 & 430 \\\hline\end{array}$ The table shows a consumption schedule. At the $300 level of disposable income,

The numerical value of the multiplier will be smaller the

$\begin{array}{|l|c|c|c|}\hline & \text { Change in income } & \begin{array}{c}\text { Change in } \\\text { Consumption }\end{array} & \text { Change in Saving } \\\hline \text { Assumed Increase in Investment } & \$ 20 & \$ & \$ 4.00 \\\hline \text { Second Round } & \$ & \$ 12.80 & \$ \\\hline \text { All Other Rounds } & \$ & \$ 51.20 & \$ \\\hline \text { Totals } & \$ & \$ & \$ 20.00 \\\hline\end{array}$ Refer to the given table, which illustrates the multiplier process. The marginal propensity to consume is

The size of the MPC is assumed to be

Which of the following is correct?

$\begin{array} { | l | c | c | c | } \hline & \text { Change in Income } & \begin{array} { c } \text { Change in } \\\text { Consumption }\end{array} & \text { Change in Saving } \\\hline \text { Assumed Increase in Investment } & \$ 20 & \$ & \$ 4.00 \\\hline \text { Second Round } & \$ & \$ 12.80 & \$ \\\hline \text { All Other Rounds } & \$ & \$ 51.20 & \$ \\\hline \text { Totals } & \$ & \$ & \$ 20.00 \\\hline\end{array}$ Refer to the given table, which illustrates the multiplier process. The multiplier in this economy is

Refer to the given saving schedule. As income falls from level 3 to level 2, the amount of

$\begin{array} { | c | c | } \hline \text { Disposable Income } & \text { Consumption } \\\hline \$ 200 & \$ 205 \\\hline 225 & 225 \\\hline 250 & 245 \\\hline 275 & 265 \\\hline 300 & 285 \\\hline\end{array}$ Refer to the given data. If disposable income was $325, we would expect consumption to be

The given figure suggests that

If households consume less at each level of disposable income, they are

Suppose a family's consumption exceeds its disposable income. This means that its

Refer to the given consumption schedules. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. At an income level of $400 billion, the Average propensity to save in economy (2) is

Refer to the diagram. The marginal propensity to consume is

Refer to the given diagram. The marginal propensity to consume is equal to

When the consumption schedule is plotted on a graph,

Refer to the given diagram. The economy is dissaving

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. If the firm finds it can borrow funds at an interest rate of 10 percent, the firm Should