Question 1

Savings are an example of

Accepted Answer

A)  a flow concept.
B)  a stock concept.
C)  a depreciation concept.
D)  an investment concept.E) All of the above
F) None of the above

Question 2

Suppose that when disposable income increases by $1,000,consumption spending increases by $750.Given this information,we know that the marginal propensity to consume (MPC) is

Accepted Answer

A)  .25.
B)  .75.
C)  $1,000/$750 = 1.33.
D)  1/.25 = 4.E) A) and B)
F) None of the above

Question 3

If business executives become more optimistic about the future,we would expect that

Accepted Answer

A)  the investment curve would shift outward to the right.
B)  the saving function would shift up.
C)  the consumption curve would shift up.
D)  investment spending would decrease.E) B) and D)
F) B) and C)

Question 4

Where the consumption function intersects the 45-degree line,

Accepted Answer

A)  savings will be negative.
B)  consumption will equal only autonomous consumption.
C)  the average propensity to consume is 0.5.
D)  saving will be zero.E) A) and D)
F) None of the above

Question 5

-According to the above figure,at an income level of Y1,

Accepted Answer

A)  the economy saves an amount equal to BD.
B)  the marginal propensity to save is falling.
C)  the average propensity to save is greater than one.
D)  the economy dissaves an amount equal to BD.E) C) and D)
F) A) and B)

Question 6

-Refer to the above table.Which variables in the table are NOT autonomous?

Accepted Answer

A)  Taxes,government spending,and saving.
B)  Planned investment,net exports,and government spending.
C)  Planned consumption and planned saving.
D)  Planned saving only.E) All of the above
F) A) and B)

Question 7

-Consider the above figure.The equation for the saving function is

Accepted Answer

A)  S = 40 - 0.67  .
B)  S = 40 + 0.33  .
C)  S = -40 + 0.67  .
D)  S = -40 - 0.33  .E) All of the above
F) None of the above

Question 8

-Refer to the above figure.If real Gross Domestic Product (GDP) is $6 trillion,then unplanned business inventories will

Accepted Answer

A)  rise.
B)  be zero.
C)  fall.
D)  be equal to planned inventories.E) B) and C)
F) A) and C)

Question 9

-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 is the value of the average propensity to consume when real disposable income equals $14,000?

Accepted Answer

A)  0.09
B)  0.7
C)  0.91
D)  1.1E) B) and C)
F) A) and D)

Question 10

Consumption expenditures include all of the following EXCEPT

Accepted Answer

A)  buying a pizza.
B)  going to a concert.
C)  having your house cleaned by Klean Maids.
D)  purchasing a share of stock.E) B) and D)
F) None of the above

Question 11

Autonomous consumption is

Accepted Answer

A)  consumption spending that is earned rather than transferred from the government.
B)  consumption spending that does not depend on the level of income.
C)  the amount spent on consumption when saving equals zero.
D)  consumption spending when the marginal propensity to consume is 1.E) B) and D)
F) A) and B)

Question 12

If the marginal propensity to save is 0.4 and disposable income increases from $1,000 to $1,500,saving will increase

Accepted Answer

A)  $100.
B)  $200.
C)  $300.
D)  $400.E) B) and D)
F) B) and C)

Question 13

In the graph for the consumption function,the 45-degree line

Accepted Answer

A)  contains only a consumption component.
B)  represents both planned consumption and planned investment.
C)  shows various combinations where planned consumption equals real disposable income.
D)  reflects a decreasing APC as real disposable income rises.E) A) and B)
F) All of the above

Question 14

The multiplier helps explain

Accepted Answer

A)  why a rise in government expenditures causes real Gross Domestic Product (GDP) to rise by more than the amount of the increase in government spending.
B)  why an increase in disposable income causes real Gross Domestic Product (GDP) to rise by less than the amount of the increase in disposable income.
C)  why a decrease in taxes causes real Gross Domestic Product (GDP) to fall by more than the amount of the decrease in taxes.
D)  why a fall in investment cause real Gross Domestic Product (GDP) to rise by more than the amount of the decrease in investment.E) A) and B)
F) A) and C)

Question 15

If an economy saves 20 percent of any increase in real Gross Domestic Product (GDP) ,then an increase in investment of $2 billion can produce an increase in real Gross Domestic Product (GDP) of as much as

Accepted Answer

A)  $2 billion.
B)  $10 billion.
C)  $0.4 billion.
D)  $1.6 billion.E) A) and D)
F) C) and D)

Question 16

-Refer to the above figure.The equilibrium level of real GDP occurs

Accepted Answer

A)  at point A.
B)  to the right of point A.
C)  to the left of point A.
D)  at the undetermined point on the graph depending upon the level of investment.E) A) and D)
F) A) and C)

Question 17

The ratio of the change in consumption to the change in disposable income is the

Accepted Answer

A)  marginal propensity to consume.
B)  marginal propensity to save.
C)  average propensity to consume.
D)  average propensity to save.E) A) and B)
F) C) and D)

Question 18

What is the multiplier? How is it calculated? Why is the multiplier related only to consumption spending?

Accepted Answer

The multiplier is the number by which a ...

Question 19

Which of the following is NOT a flow variable?

Accepted Answer

A)  Consumption
B)  Investment
C)  Savings
D)  SavingE) All of the above
F) A) and D)

Question 20

If the marginal propensity to consume (MPC) is 0.9,the spending multiplier will be

Accepted Answer

A)  10.
B)  1.11.
C)  0.9.
D)  0.1.E) None of the above
F) All of the above

Exam 12: Consumption, real GDP, and the Multiplier

Suppose that when disposable income increases by $1,000,consumption spending increases by $750.Given this information,we know that the marginal propensity to consume (MPC) is

Correct AnswerverifiedShow Answer

The ratio of the change in consumption to the change in disposable income is the

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-Refer to the above table.Which variables in the table are NOT autonomous?

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Autonomous consumption is

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Where the consumption function intersects the 45-degree line,

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-Refer to the above figure.If real Gross Domestic Product (GDP) is $6 trillion,then unplanned business inventories will

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In the graph for the consumption function,the 45-degree line

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If the marginal propensity to save is 0.4 and disposable income increases from $1,000 to $1,500,saving will increase

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Savings are an example of

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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 is the value of the average propensity to consume when real disposable income equals $14,000?

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If business executives become more optimistic about the future,we would expect that

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-Refer to the above figure.The equilibrium level of real GDP occurs

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If an economy saves 20 percent of any increase in real Gross Domestic Product (GDP) ,then an increase in investment of $2 billion can produce an increase in real Gross Domestic Product (GDP) of as much as

Correct AnswerverifiedShow Answer

What is the multiplier? How is it calculated? Why is the multiplier related only to consumption spending?

Correct AnswerverifiedThe multiplier is the number by which a ...View AnswerShow Answer

Consumption expenditures include all of the following EXCEPT

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-Consider the above figure.The equation for the saving function is

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If the marginal propensity to consume (MPC) is 0.9,the spending multiplier will be

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Which of the following is NOT a flow variable?

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The multiplier helps explain

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-According to the above figure,at an income level of Y1,

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The multiplier is the number by which a ...
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