Question 1

Economists disagree on the actual size of the multiplier.

Accepted Answer

A) True 
 B)False

Question 2

The consumption schedule in the diagram below indicates that:

Accepted Answer

A)  consumers will maximize their satisfaction where the consumption schedule and 45 °\degree°  line intersect.
B)  up to a point consumption exceeds income, but then falls below income.
C)  the MPC falls as income increases.
D)  households consume as much as they earn. E) None of the above
F) B) and D)

Question 3

Refer to the above diagram.The average propensity to consume:

Accepted Answer

A)  is greater than 1 at all levels of disposable income above $100.
B)  is greater than 1 at all levels of disposable income below $100.
C)  is equal to the average propensity to save.
D)  cannot be determined from the information given.E) A) and B)
F) A) and D) B

Question 4

The average propensity to consume indicates the:

Accepted Answer

A)  amount by which income exceeds consumption.
B)  relationship between a change in saving and the consequent change in consumption.
C)  percentage of total income which will be consumed.
D)  percentage of a change in income which will be consumed.E) All of the above
F) A) and B)

Question 5

The multiplier effect indicates that:

Accepted Answer

A)  a decline in the interest rate will cause a proportionately larger increase in investment.
B)  a change in aggregate expenditures will change aggregate income by a larger amount.
C)  a change in aggregate expenditures will increase aggregate income by the same amount.
D)  a small increase in total income will generate a large change in aggregate expenditures.E) B) and D)
F) B) and C)

Question 6

The investment-demand curve will shift to the left as a result of:

Accepted Answer

A)  an increase in the excess productive capacity available in industry.
B)  a decrease in business taxes.
C)  increased business optimism with respect to future economic conditions.
D)  a decrease in labor costs.E) A) and B)
F) B) and D)

Question 7

Suppose that the level of GDP increased by $100 billion in an economy where the marginal propensity to consume is 0.5.The initial change in spending must have been:

Accepted Answer

A)  $100 billion.
B)  $50 billion.
C)  $500 billion.
D)  $5 billion.E) A) and B)
F) A) and C) B

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

As aggregate income increases, the APC:

Accepted Answer

A)  and APS will both increase.
B)  will decrease, but the APS will increase.
C)  will increase, but the APS will decrease.
D)  and APS will both decrease.E) All of the above
F) A) and B)

Question 10

If for some reason households become increasingly thrifty, we could show this by:

Accepted Answer

A)  a downshift of the saving schedule.
B)  an upshift of the consumption schedule.
C)  an upshift of the saving schedule.
D)  an increase in the equilibrium GDP.E) All of the above
F) A) and B)

Question 11

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 12

The department of finance estimates that the actual multiplier in Canada ranges from:

Accepted Answer

A)  0.1 to 1.6.
B)  0.4 to 2.1.
C)  0.7 to 3.4.
D)  0.2 to 0.9.E) B) and D)
F) A) and B)

Question 13

Refer to the above diagram.The break-even level of disposable income:

Accepted Answer

A)  is zero.
B)  is minus $10.
C)  is $100.
D)  cannot be determined from the information given.E) A) and B)
F) All of the above

Question 14

If the marginal propensity to save is 0.2 in a private closed economy, a $20 billion rise in investment spending will increase:

Accepted Answer

A)  GDP by $120 billion.
B)  GDP by $20 billion.
C)  saving by $25 billion.
D)  consumption by $80 billion.E) A) and D)
F) A) and B)

Question 15

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.E) None of the above
F) A) and D)

Question 16

Assume that for the entire business sector of a private closed economy there is $0 worth of investment projects which will yield an expected rate of return of 25 percent or more.But there are $15 worth of investments which will yield an expected rate of return of 20-25 percent; another $15 with an expected rate of return of 15-20 percent; and similarly an additional $15 of investment projects in each successive rate of return range down to and including the 0-5 percent range.  Which of the lines on the above diagram represents these data?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) B) and C)
F) None of the above

Question 17

If the MPS is 1, the multiplier will be 1.

Accepted Answer

A) True 
 B)False

Question 18

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.  Refer to the above data.The marginal propensity to consume in economy (1) :

Accepted Answer

A)  is .5.
B)  is .3.
C)  is .8.
D)  is .7.E) B) and C)
F) A) and C)

Question 19

Dissaving means:

Accepted Answer

A)  the same thing as disinvesting.
B)  that households are spending in excess of their current incomes.
C)  that saving and investment are equal.
D)  that disposable income is less than zero.E) A) and B)
F) A) and C) B

Question 20

The investment demand curve of an economy is:

Accepted Answer

A)  downward sloping.
B)  upward sloping.
C)  horizontal.
D)  vertical.E) B) and C)
F) A) and D)

Exam 10: Part B: Basic Macroeconomic Relationships

Economists disagree on the actual size of the multiplier.

Correct Answer
verified

Correct Answer
verified

Refer to the above diagram.The average propensity to consume:

Correct Answer
verified
B

The average propensity to consume indicates the:

Correct Answer
verified

The multiplier effect indicates that:

Correct Answer
verified

The investment-demand curve will shift to the left as a result of:

Correct Answer
verified

Suppose that the level of GDP increased by $100 billion in an economy where the marginal propensity to consume is 0.5.The initial change in spending must have been:

Correct Answer
verified
B

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

Correct Answer
verified

As aggregate income increases, the APC:

Correct Answer
verified

If for some reason households become increasingly thrifty, we could show this by:

Correct Answer
verified

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

Correct Answer
verified

The department of finance estimates that the actual multiplier in Canada ranges from:

Correct Answer
verified

Refer to the above diagram.The break-even level of disposable income:

Correct Answer
verified

If the marginal propensity to save is 0.2 in a private closed economy, a $20 billion rise in investment spending will increase:

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

If the MPS is 1, the multiplier will be 1.

Correct Answer
verified

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the above data.The marginal propensity to consume in economy (1) :

Correct Answer
verified

Dissaving means:

Correct Answer
verified
B

The investment demand curve of an economy is:

Correct Answer
verified

Exam 10: Part B: Basic Macroeconomic Relationships

Economists disagree on the actual size of the multiplier.

Correct AnswerverifiedShow Answer

The consumption schedule in the diagram below indicates that:

Correct AnswerverifiedShow Answer

Refer to the above diagram.The average propensity to consume:

Correct AnswerverifiedB

The average propensity to consume indicates the:

Correct AnswerverifiedShow Answer

The multiplier effect indicates that:

Correct AnswerverifiedShow Answer

The investment-demand curve will shift to the left as a result of:

Correct AnswerverifiedShow Answer

Suppose that the level of GDP increased by $100 billion in an economy where the marginal propensity to consume is 0.5.The initial change in spending must have been:

Correct AnswerverifiedB

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

Correct AnswerverifiedShow Answer

As aggregate income increases, the APC:

Correct AnswerverifiedShow Answer

If for some reason households become increasingly thrifty, we could show this by:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The department of finance estimates that the actual multiplier in Canada ranges from:

Correct AnswerverifiedShow Answer

Refer to the above diagram.The break-even level of disposable income:

Correct AnswerverifiedShow Answer

If the marginal propensity to save is 0.2 in a private closed economy, a $20 billion rise in investment spending will increase:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the MPS is 1, the multiplier will be 1.

Correct AnswerverifiedShow Answer

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the above data.The marginal propensity to consume in economy (1) :

Correct AnswerverifiedShow Answer

Dissaving means:

Correct AnswerverifiedB

The investment demand curve of an economy is:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified