Question 1

Assume that an increase in a household's disposable income from $40,000 to $48,000 leads to an increase in consumption from $35,000 to $41,000, then the

Accepted Answer

A)   slope of the consumption schedule is 0.75.
B)   average propensity to consume is 0.75.
C)   marginal propensity to save is 0.20.
D)   marginal propensity to consume is 0.6.

Question 2

Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. A $2 billion increase in consumption at
Each level of DI could be caused by

Accepted Answer

A)   a decrease in consumer wealth.
B)   new expectations of higher future income.
C)   an increase in taxation.
D)   an increase in saving.

Question 3

Refer to the given diagram. The marginal propensity to save is

Accepted Answer

A)   CD/EF.
B)   CB/CF.
C)   CB/AF.
D)   EF/CB.

Question 4

In a private closed economy, national income is $4.5 trillion and saving equals $6.4 billion. Based on these data, the marginal propensity to consume

Accepted Answer

A)   decreases as income increases.
B)   is greater than the marginal propensity to save.
C)   is less than the average propensity to consume.
D)   cannot be calculated from the data given.

Question 5

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 6

The saving schedule shows the relationship of saving of households to the level of

Accepted Answer

A)   consumption.
B)   investment.
C)   disposable income.
D)   the average propensity to save.

Question 7

Which one of the following will cause a movement up along an economy's saving schedule?

Accepted Answer

A)   an increase in household borrowing
B)   an increase in disposable income
C)   an increase in stock prices
D)   an increase in interest rates

Question 8

The average propensity to consume is deﬁned as income divided by consumption.

Accepted Answer

A) True 
 B)False

Question 9

The multiplier applies to

Accepted Answer

A)   investment but not to net exports or government spending.
B)   investment, net exports, and government spending.
C)   increases in spending but not to decreases in spending.
D)   spending by the private sector but not by the public sector.

Question 10

Change in Income  Change in  Consumption  Change in Saving  Assumed Increase in Investment $20$$4.00 Second Round $$12.80$ All Other Rounds $$51.20$ Totals $$$20.00\begin{array} { | l | c | c | c | } \hline & 	ext { Change in Income } & \begin{array} { c } 	ext { Change in } \	ext { Consumption }\end{array} & 	ext { Change in Saving } \\hline 	ext { Assumed Increase in Investment } & \$ 20 & \$ & \$ 4.00 \\hline 	ext { Second Round } & \$ & \$ 12.80 & \$ \\hline 	ext { All Other Rounds } & \$ & \$ 51.20 & \$ \\hline 	ext { Totals } & \$&\$ & \$ 20.00 \\hline\end{array} Assumed Increase in Investment  Second Round  All Other Rounds  Totals ​ Change in Income $20$$$​ Change in  Consumption ​$$12.80$51.20$​ Change in Saving $4.00$$$20.00​​  Refer to the given table, which illustrates the multiplier process. The total change in income resulting from the initial change in investment will be

Accepted Answer

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

Question 11

The amount of consumption in an economy correlates

Accepted Answer

A)   inversely with the level of disposable income.
B)   directly with the level of disposable income.
C)   directly with the level of saving.
D)   directly with the rate of interest.

Question 12

The fraction, or percentage, of total income that 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 13

Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by

Accepted Answer

A)   $3 billion.
B)   $2/3 billion.
C)   $6 billion.
D)   $2 billion.

Question 14

Investment is highly stable; it increases over time at a very steady rate.

Accepted Answer

A) True 
 B)False

Question 15

If the MPC is constant at various levels of income, then the APC must also be constant at all of those
income levels.

Accepted Answer

A) True 
 B)False

Question 16

A rightward shift of the investment demand curve might be caused by

Accepted Answer

A)   an increase in the price level.
B)   a decline in the real interest rate.
C)   businesses planning to increase their stock of inventories.
D)   an increase in business taxes.

Question 17

In an economy, for every $1,600 decrease in income, spending falls by $1,200. 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 0.25.

Question 18

The immediate determinants of investment spending are the

Accepted Answer

A)   expected rate of return on capital goods and the real interest rate.
B)   level of saving and the real interest rate.
C)   marginal propensity to consume and the real interest rate.
D)   interest rate and the expected price level.

Question 19

The consumption schedule directly relates

Accepted Answer

A)   consumption to the level of disposable income.
B)   saving to the level of disposable income.
C)   disposable income to domestic income.
D)   consumption to saving.

Question 20

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.

Exam 10: Basic Macroeconomic Relationships

Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by

Correct Answer
verified

Which one of the following will cause a movement up along an economy's saving schedule?

Correct Answer
verified

If the MPC is constant at various levels of income, then the APC must also be constant at all of those income levels.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

The average propensity to consume is deﬁned as income divided by consumption.

Correct Answer
verified

The immediate determinants of investment spending are the

Correct Answer
verified

In an economy, for every $1,600 decrease in income, spending falls by $1,200. It can be concluded that the

Correct Answer
verified

Assume that an increase in a household's disposable income from $40,000 to $48,000 leads to an increase in consumption from $35,000 to $41,000, then the

Correct Answer
verified

Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. A $2 billion increase in consumption at Each level of DI could be caused by

Correct Answer
verified

In a private closed economy, national income is $4.5 trillion and saving equals $6.4 billion. Based on these data, the marginal propensity to consume

Correct Answer
verified

The multiplier applies to

Correct Answer
verified

The consumption schedule directly relates

Correct Answer
verified

Correct Answer
verified

The saving schedule shows the relationship of saving of households to the level of

Correct Answer
verified

Investment is highly stable; it increases over time at a very steady rate.

Correct Answer
verified

The amount of consumption in an economy correlates

Correct Answer
verified

A rightward shift of the investment demand curve might be caused by

Correct Answer
verified

Refer to the given diagram. The marginal propensity to save is

Correct Answer
verified

Investment spending in the United States tends to be unstable because

Correct Answer
verified

Exam 10: Basic Macroeconomic Relationships

Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by

Correct AnswerverifiedShow Answer

Which one of the following will cause a movement up along an economy's saving schedule?

Correct AnswerverifiedShow Answer

If the MPC is constant at various levels of income, then the APC must also be constant at all of those income levels.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The average propensity to consume is deﬁned as income divided by consumption.

Correct AnswerverifiedShow Answer

The immediate determinants of investment spending are the

Correct AnswerverifiedShow Answer

In an economy, for every $1,600 decrease in income, spending falls by $1,200. It can be concluded that the

Correct AnswerverifiedShow Answer

Assume that an increase in a household's disposable income from $40,000 to $48,000 leads to an increase in consumption from $35,000 to $41,000, then the

Correct AnswerverifiedShow Answer

Refer to the given consumption schedules. DI signiﬁes disposable income and C represents consumption expenditures. All ﬁgures are in billions of dollars. A $2 billion increase in consumption at Each level of DI could be caused by

Correct AnswerverifiedShow Answer

In a private closed economy, national income is $4.5 trillion and saving equals $6.4 billion. Based on these data, the marginal propensity to consume

Correct AnswerverifiedShow Answer

The multiplier applies to

Correct AnswerverifiedShow Answer

The consumption schedule directly relates

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The saving schedule shows the relationship of saving of households to the level of

Correct AnswerverifiedShow Answer

Investment is highly stable; it increases over time at a very steady rate.

Correct AnswerverifiedShow Answer

The amount of consumption in an economy correlates

Correct AnswerverifiedShow Answer

A rightward shift of the investment demand curve might be caused by

Correct AnswerverifiedShow Answer

Refer to the given diagram. The marginal propensity to save is

Correct AnswerverifiedShow Answer

Investment spending in the United States tends to be unstable because

Correct AnswerverifiedShow Answer

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