Question 1

If a $100 billion decrease in investment spending causes income to decline by $100 billion in the first round of the multiplier process and by $75 billion in the second round,income will eventually decline by:

Accepted Answer

A)   $400 billion.
B)   $300 billion.
C)   $200 billion.
D)   $500 billion.

Question 2

A high rate of inflation is likely to cause a:

Accepted Answer

A)   high nominal interest rate.
B)   low nominal interest rate.
C)   low rate of growth of nominal GDP.
D)   decrease in nominal wages.

Question 3

-Refer to the above diagram.At income level F the volume of saving is:

Accepted Answer

A)   BD.
B)   AB.
C)   CF - BF.
D)   DC.

Question 4

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 5

The consumption schedule is drawn on the assumption that as disposable income increases consumption will:

Accepted Answer

A)   be unaffected.
B)   increase absolutely,but remain constant as a percentage of income.
C)   increase absolutely,but decline as a percentage of income.
D)   increase absolutely and as a percentage of income.

Question 6

Which of the following equations represents the saving schedule implicit in the data below? d B)  S = 40 + .4Yd C)  S = 40 + .6Yd D)  S = -40 + .4Yd" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   S = C - Yd
B)   S = 40 + .4Yd
C)   S = 40 + .6Yd
D)   S = -40 + .4Yd

Question 7

-Refer to the above diagram.At disposable income level D,consumption:

Accepted Answer

A)   is equal to CD.
B)   is equal to OD minus CD.
C)   is equal to CD/OD.
D)   is equal to CD plus BD.

Question 8

The MPC for an economy is:

Accepted Answer

A)   the slope of the consumption schedule or line.
B)   the slope of the savings schedule or line.
C)   1 divided by the slope of the consumption schedule or line.
D)   1 divided by the slope of the savings schedule or line.

Question 9

The reverse wealth effect will tend to decrease consumption and increase saving.

Accepted Answer

A) True 
 B)False

Question 10

The simple multiplier is:

Accepted Answer

A)   1/MPC.
B)   1/(1 + MP
C)  .
C)   1/MPS.
D)   1/(1 - MPS) .

Question 11

The following table illustrates the multiplier process in a private closed economy:
 
-Refer to the above table.The marginal propensity to save is:

Accepted Answer

A)   .5.
B)   .25.
C)   .2.
D)   .1.

Question 12

1/2 percent. B)  dissaving is $5. C)  the average propensity to save is .20. D)  the average propensity to consume is .80." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above data.At the $200 level of disposable income:

Accepted Answer

A)   the marginal propensity to save is 21/2 percent.
B)   dissaving is $5.
C)   the average propensity to save is .20.
D)   the average propensity to consume is .80.

Question 13

The greater is the marginal propensity to consume:

Accepted Answer

A)   the smaller is the marginal propensity to save.
B)   the higher is the interest rate.
C)   the lower is the average propensity to consume.
D)   the lower is the price level.

Question 14

-Refer to the above diagram.The marginal propensity to consume is:

Accepted Answer

A)   .2.
B)   .8.
C)   .4.
D)   .3.

Question 15

If the MPC is .6,the simple multiplier will be:

Accepted Answer

A)   4.0.
B)   6.0.
C)   2.5.
D)   1.67.

Question 16

Suppose the consumption schedule is: C = 20 + .9Y,where C is consumption and Y is disposable income.
-Refer to the above data.At an $800 level of disposable income,the level of saving is:

Accepted Answer

A)   $180
B)   $740
C)   $60
D)   $18

Question 17

If the consumption schedule is linear,then the:

Accepted Answer

A)   saving schedule will also be linear.
B)   MPS will decline as income rises.
C)   MPC will decline as income rises.
D)   APC will be constant at all levels of income.

Question 18

The most important determinant of consumption and saving is the:

Accepted Answer

A)   level of bank credit.
B)   level of disposable income.
C)   interest rate.
D)   price level.

Question 19

If the real interest rate in the economy is i and the expected rate of return from additional investment is r,then other things equal:

Accepted Answer

A)   investment will take place until i and r are equal.
B)   investment will take place until r exceeds i by the greatest amount.
C)   r will rise as more investment is undertaken.
D)   i will rise as more investment is undertaken.

Question 20

-Refer to the above diagram.The marginal propensity to save is equal to:

Accepted Answer

A)   CD/0D.
B)   0B/0A.
C)   0D/0D.
D)   CD/BD.

Exam 10: Basic Macroeconomic Relationships

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:

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-Refer to the above diagram.At income level F the volume of saving is:

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-Refer to the above data.At the $200 level of disposable income:

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Which of the following equations represents the saving schedule implicit in the data below?

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-Refer to the above diagram.At disposable income level D,consumption:

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The MPC for an economy is:

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The reverse wealth effect will tend to decrease consumption and increase saving.

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A high rate of inflation is likely to cause a:

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The following table illustrates the multiplier process in a private closed economy: -Refer to the above table.The marginal propensity to save is:

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The most important determinant of consumption and saving is the:

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Suppose the consumption schedule is: C = 20 + .9Y,where C is consumption and Y is disposable income. -Refer to the above data.At an $800 level of disposable income,the level of saving is:

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If the MPC is .6,the simple multiplier will be:

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-Refer to the above diagram.The marginal propensity to save is equal to:

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If the consumption schedule is linear,then the:

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If a $100 billion decrease in investment spending causes income to decline by $100 billion in the first round of the multiplier process and by $75 billion in the second round,income will eventually decline by:

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The consumption schedule is drawn on the assumption that as disposable income increases consumption will:

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The greater is the marginal propensity to consume:

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If the real interest rate in the economy is i and the expected rate of return from additional investment is r,then other things equal:

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The simple multiplier is:

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-Refer to the above diagram.The marginal propensity to consume is:

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