Question 1

It is conceivable that the APC, APS, MPC, and MPS could simultaneously be

Accepted Answer

A)  APC = 1.0; APS = 0.1; MPC = 0.8; MPS = 0.25.
B)  APC = 0.8; APS = 0.2; MPC = 1.1; MPS = 0.1.
C)  APC = 1.3; APS = -0.3; MPC = 0.9; MPS = 0.1.
D)  APC = 1.0; APS = 0; MPC = 1.0; MPS = 0.15.E) A) and C)
F) None of the above

Question 2

In the Keynesian model, planned investment is inversely related to

Accepted Answer

A)  the interest rate.
B)  the level of income.
C)  the wage rate.
D)  the tax rate.E) A) and D)
F) C) and D)

Question 3

-Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. What does planned real saving equal when real disposable income equals $6,000?

Accepted Answer

A)  -3,000
B)  -1,200
C)  0
D)  7,200E) All of the above
F) A) and C)

Question 4

Which of the following is FALSE?

Accepted Answer

A)  1 - MPC = MPS
B)  1 + MPC = MPS
C)  1 - APS = APC
D)  APC + APS = 1E) All of the above
F) B) and D)

Question 5

Suppose government spending decreases by $100 billion and the marginal propensity to consume (MPC) is 0.8. Given this information, this decrease in government spending will cause a(n)

Accepted Answer

A)  increase in equilibrium real GDP equal to $500 billion.
B)  increase in equilibrium real GDP equal to $800 billion.
C)  decrease in equilibrium real GDP equal to $500 billion.
D)  decrease in equilibrium real GDP equal to $800 billion.E) A) and B)
F) A) and C)

Question 6

The multiplier is the ratio of the

Accepted Answer

A)  change in the equilibrium level of real GDP to the change in autonomous expenditures.
B)  equilibrium level of real GDP to the change in induced expenditures.
C)  change in induced expenditures to the change in autonomous expenditures.
D)  change in autonomous expenditures to the change in the equilibrium level of real GDP.E) A) and B)
F) B) and D)

Question 7

The marginal propensity to consume is

Accepted Answer

A)  real consumption/real disposable income.
B)  real saving/real disposable income.
C)  change in real consumption/change in real disposable income.
D)  change in real saving/change in real disposable income.E) C) and D)
F) B) and D)

Question 8

The consumption function will shift with

Accepted Answer

A)  an increase in real disposable income.
B)  a change in saving.
C)  a decrease in real disposable income.
D)  a change in household wealth.E) A) and D)
F) C) and D)

Question 9

-Refer to the above figure. If real disposable income is $30,000, saving is

Accepted Answer

A)  $0.
B)  $4000.
C)  $5000.
D)  $6000.E) A) and C)
F) A) and D)

Question 10

The consumption function shows the relationship

Accepted Answer

A)  between households' disposable income and their consumption spending.
B)  between investment and rate of return.
C)  between consumption spending and capital gains.
D)  between government spending and tax collection.E) B) and C)
F) None of the above

Question 11

The larger is the marginal propensity to consume (MPC)

Accepted Answer

A)  the larger is the multiplier.
B)  the smaller is the multiplier.
C)  the smaller is the slope of the consumption function.
D)  the larger is the slope of the saving function.E) A) and B)
F) A) and C)

Question 12

Investment includes spending on

Accepted Answer

A)  capital goods, buildings, and consumer durable goods.
B)  capital goods, buildings, and changes in business inventories.
C)  capital goods, consumer durable goods, and changes in business inventories.
D)  capital goods, buildings, and changes in business savings.E) C) and D)
F) All of the above

Question 13

Whenever total planned expenditures differ from real GDP

Accepted Answer

A)  unplanned inventories will remain unchanged.
B)  unplanned inventories will change.
C)  government spending will adjust.
D)  tax revenues will move the economy back to equilibrium.E) A) and B)
F) A) and C)

Question 14

If the multiplier in the economy is 3, the marginal propensity to save (MPS) must be

Accepted Answer

A)  0.33.
B)  0.67.
C)  1.
D)  3.E) B) and C)
F) A) and D)

Question 15

If the average propensity to save (APS) is 0.60, then this means

Accepted Answer

A)  people are saving 60 percent of their disposable income.
B)  people are spending 60 percent of their disposable income.
C)  the marginal tax rate is 60.
D)  the government spends 60 percent of its revenues.E) A) and B)
F) A) and C)

Question 16

When the equilibrium price level adjusts to an increase in autonomous investment spending, the impact of the multiplier effect resulting from that spending increase

Accepted Answer

A)  will increase real GDP by an amount smaller than the multiplier effect would indicate.
B)  will increase nominal GDP by an amount smaller than the multiplier effect would indicate.
C)  will have no impact on the real GDP.
D)  is only felt when there are changes in consumption.E) B) and D)
F) A) and C)

Question 17

What would happen to the planned investment function if business taxes were increased?

Accepted Answer

A)  It would shift to the right.
B)  It would shift to the left.
C)  It would shift upward.
D)  There would be no change.E) A) and D)
F) B) and C)

Question 18

-Refer to the above figure. If real GDP is $4 trillion, then

Accepted Answer

A)  consumption expenditures are too low.
B)  unplanned inventories will decrease.
C)  unplanned inventories will increase.
D)  actual investment spending equals $1 trillion as planned investment spending plus unplanned inventory increases equal $1 trillion.E) All of the above
F) A) and C)

Question 19

The relationship between real consumption spending and real disposable income

Accepted Answer

A)  is direct.
B)  is inverse.
C)  plots a vertical line.
D)  plots a horizontal line.E) B) and C)
F) All of the above

Question 20

Which of the following would increase the level of planned real investment?

Accepted Answer

A)  an increase in the interest rate
B)  an expectation of higher future profits
C)  an expectation of higher future costs
D)  an increase in business taxesE) C) and D)
F) B) and D)

Exam 11: Consumption, Real GDP, and the Multiplier

The larger is the marginal propensity to consume (MPC)

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It is conceivable that the APC, APS, MPC, and MPS could simultaneously be

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What would happen to the planned investment function if business taxes were increased?

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-Refer to the above figure. If real disposable income is $30,000, saving is

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Whenever total planned expenditures differ from real GDP

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The multiplier is the ratio of the

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If the average propensity to save (APS) is 0.60, then this means

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In the Keynesian model, planned investment is inversely related to

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Which of the following is FALSE?

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When the equilibrium price level adjusts to an increase in autonomous investment spending, the impact of the multiplier effect resulting from that spending increase

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Investment includes spending on

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The marginal propensity to consume is

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The relationship between real consumption spending and real disposable income

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The consumption function will shift with

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-Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. What does planned real saving equal when real disposable income equals $6,000?

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Which of the following would increase the level of planned real investment?

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If the multiplier in the economy is 3, the marginal propensity to save (MPS) must be

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-Refer to the above figure. If real GDP is $4 trillion, then

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The consumption function shows the relationship

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Suppose government spending decreases by $100 billion and the marginal propensity to consume (MPC) is 0.8. Given this information, this decrease in government spending will cause a(n)

Correct AnswerverifiedShow Answer

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