Question 1

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

Accepted Answer

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

Question 2

The MPC can be defined as the fraction of a:

Accepted Answer

A)   change in income which is not spent.
B)   change in income which is spent.
C)   given total income which is not consumed.
D)   given total income which is consumed.

Question 3

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

Accepted Answer

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

Question 4

Assume the economy's consumption and saving schedules simultaneously shift downward. This must be the result of:

Accepted Answer

A)   an increase in disposable income.
B)   an increase in household wealth.
C)   the expectation of a recession.
D)   an increase in personal taxes

Question 5

3 only. C)  C1, and C2. D)  C4 only." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram. The APC diminishes as income increases for:

Accepted Answer

A)   none of the consumption schedules shown.
B)   C3 only.
C)   C1, and C2.
D)   C4 only.

Question 6

If the inflation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is:

Accepted Answer

A)   2 percent.
B)   zero percent.
C)   10 percent.
D)   22 percent.

Question 7

If DI is $275 billion and the APC is 0.8, it can be concluded that saving is $55 billion.

Accepted Answer

A) True 
 B)False

Question 8

If Ben's MPC is .80, this means that he will:

Accepted Answer

A)   spend eight-tenths of any increase in his disposable income.
B)   spend eight-tenths of any level of disposable income.
C)   break even when his disposable income is $8,000.
D)   save eight-tenths of any level of disposable income.

Question 9

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)   a decline in the acquisition, maintenance and operating costs.
D)   an increase in business taxes.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Refer to the data below. When plotted on a graph, the vertical intercept of the consumption schedule in this economy is _____ and the slope is _____.

Accepted Answer

A)   -2 and 1
B)   $2 and .18
C)   $100 and .5
D)   $2 and .9

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

At the point where the consumption schedule intersects the 45-degree line:

Accepted Answer

A)   the MPC equals 1.
B)   the APC is zero.
C)   saving equals income.
D)   saving is zero.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

If the real interest rate in the economy is i and the expected rate of return from additional investment is r, then more investment will be forthcoming when:

Accepted Answer

A)   r is greater than i.
B)   i is greater than r.
C)   r falls.
D)   i rises.

Question 16

Economists disagree on the actual size of the multiplier.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following will not cause the consumption schedule to shift?

Accepted Answer

A)   a sharp increase in the amount of wealth held by households
B)   a change in consumer incomes
C)   the expectation of a recession
D)   a growing expectation that consumer durables will be in short supply

Question 18

If Smith's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, it may be concluded that her marginal propensity to:

Accepted Answer

A)   save is three-fifths.
B)   consume is one-half.
C)   consume is three-fifths.
D)   consume is one-sixth.

Question 19

The simple multiplier is defined as:

Accepted Answer

A)   1 - MPS.
B)   change in GDP × initial change in spending.
C)   change in GDP/initial change in spending.
D)   change in GDP - initial change in spending.

Question 20

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.

Exam 8: Basic Macroeconomic Relationships

At the point where the consumption schedule intersects the 45-degree line:

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The MPC can be defined as the fraction of a:

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Economists disagree on the actual size of the multiplier.

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If DI is $275 billion and the APC is 0.8, it can be concluded that saving is $55 billion.

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

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

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Assume the economy's consumption and saving schedules simultaneously shift downward. This must be the result of:

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The immediate determinants of investment spending are the:

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

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-Refer to the above diagram. The APC diminishes as income increases for:

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Which of the following will not cause the consumption schedule to shift?

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

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If Ben's MPC is .80, this means that he will:

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If Smith's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, it may be concluded that her marginal propensity to:

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The simple multiplier is defined as:

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Refer to the data below. When plotted on a graph, the vertical intercept of the consumption schedule in this economy is _____ and the slope is _____.

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

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If the inflation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is:

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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 more investment will be forthcoming when:

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

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Refer to the data below. When plotted on a graph, the vertical intercept of the consumption schedule in this economy is _ and the slope is _.

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