Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

In contrast to investment, consumption is

Accepted Answer

A)  relatively unstable.
B)  relatively stable.
C)  measurable.
D)  unmeasurable.E) A) and B)
F) A) and C)

Question 3

The greater the MPC, the greater the multiplier.

Accepted Answer

A) True 
 B)False

Question 4

(Consider This)  During the Great Recession of 2007-2009,

Accepted Answer

A)  real interest rates and investment spending both declined.
B)  real interest rates and investment spending both increased.
C)  real interest rates increased, choking off investment spending.
D)  real interest rates decreased, but expected returns from investment remained unchanged.E) A) and D)
F) A) and B)

Question 5

The MPC can be defined as that fraction of a

Accepted Answer

A)  change in income that is not spent.
B)  change in income that is spent.
C)  given total income that is not consumed.
D)  given total income that is consumed.E) None of the above
F) All of the above

Question 6

With an MPS of 0.3, the MPC will be

Accepted Answer

A)  1 − 0.3.
B)  0.3 − 1.
C)  1/0.3.
D)  0.3.E) None of the above
F) C) and D)

Question 7

Investment is highly stable; it increases over time at a very steady rate.

Accepted Answer

A) True 
 B)False

Question 8

The Great Recession of 2007-2009 altered the prior behavior of consumers in the economy by

Accepted Answer

A)  shifting the consumption schedule up.
B)  shifting the consumption schedule down.
C)  shifting the saving schedule down.
D)  moving the economy down along a stable consumption schedule.E) A) and C)
F) All of the above

Question 9

When the consumption schedule is plotted on a graph,

Accepted Answer

A)  consumption is on the horizontal axis and saving is on the vertical axis.
B)  consumption is on the vertical axis and saving is on the horizontal axis.
C)  consumption is on the horizontal axis and disposable income is on the vertical axis.
D)  consumption is on the vertical axis and disposable income is on the horizontal axis.E) C) and D)
F) A) and B)

Question 10

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.E) B) and C)
F) A) and D)

Question 11

The consumption schedule shows

Accepted Answer

A)  that the MPC increases in proportion to GDP.
B)  that households consume more when interest rates are low.
C)  that consumption depends primarily on the level of business investment.
D)  the amounts households intend to consume at various possible levels of aggregate income.E) C) and D)
F) A) and B)

Question 12

A lower real interest rate typically induces consumers to

Accepted Answer

A)  save more.
B)  buy fewer imported goods.
C)  purchase more goods that are bought using credit.
D)  purchase fewer goods that are bought without using credit.E) A) and B)
F) A) and C)

Question 13

The purchase of capital goods, like consumer goods, can be postponed; it tends to contribute to in investment spending.

Accepted Answer

A)  nondurable; instability
B)  nondurable; stability
C)  durable; instability
D)  durable; stabilityE) None of the above
F) A) and C)

Question 14

Given the consumption schedule, it is possible to graph the relevant saving schedule by

Accepted Answer

A)  subtracting the MPC from 1 at each level of income.
B)  subtracting investment from consumption at each level of GDP.
C)  plotting the horizontal differences between the consumption schedule and the 45-degree line.
D)  plotting the vertical differences between the consumption schedule and the 45-degree line.E) B) and C)
F) A) and B)

Question 15

The saving schedule would be shifted upward by

Accepted Answer

A)  an increase in the value of real and financial assets.
B)  a reduction in real interest rates.
C)  expectations of rising prices of products.
D)  a decrease in taxes.E) B) and C)
F) None of the above

Question 16

Generally speaking, the greater the MPS, the

Accepted Answer

A)  smaller would be the increase in income which results from an increase in consumption spending.
B)  larger would be the increase in income which results from an increase in consumption spending.
C)  larger would be the increase in income which results from a decrease in consumption spending.
D)  smaller would be the increase in income which results from a decrease in consumption spending.E) None of the above
F) A) and D)

Question 17

Which of the following is not an assumption of the simple multiplier formula?

Accepted Answer

A)  The economy has excess capacity and room to expand output.
B)  Firms will raise prices as buyers buy more of their output.
C)  People will spend more if they earn additional income.
D)  Business firms will increase production if demand for their output increases.E) All of the above
F) A) and D)

Question 18

The multiplier will be larger, the steeper is the saving schedule.

Accepted Answer

A) True 
 B)False

Question 19

If people saved more of any extra income that they received, then the consumption schedule would become flatter.

Accepted Answer

A) True 
 B)False

Question 20

The fraction, or percentage, of total income that is saved is called the

Accepted Answer

A)  average propensity to save.
B)  marginal propensity to save.
C)  disposable income schedule.
D)  saving schedule.E) A) and C)
F) A) and B)

Exam 30: Basic Macroeconomic Relationships

In contrast to investment, consumption is

Correct AnswerverifiedShow Answer

A lower real interest rate typically induces consumers to

Correct AnswerverifiedShow Answer

Which of the following is not an assumption of the simple multiplier formula?

Correct AnswerverifiedShow Answer

Generally speaking, the greater the MPS, the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The purchase of capital goods, like consumer goods, can be postponed; it tends to contribute to in investment spending.

Correct AnswerverifiedShow Answer

The multiplier will be larger, the steeper is the saving schedule.

Correct AnswerverifiedShow Answer

The MPC can be defined as that fraction of a

Correct AnswerverifiedShow Answer

If people saved more of any extra income that they received, then the consumption schedule would become flatter.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the consumption schedule is plotted on a graph,

Correct AnswerverifiedShow Answer

Given the consumption schedule, it is possible to graph the relevant saving schedule by

Correct AnswerverifiedShow Answer

(Consider This) During the Great Recession of 2007-2009,

Correct AnswerverifiedShow Answer

With an MPS of 0.3, the MPC will be

Correct AnswerverifiedShow Answer

The Great Recession of 2007-2009 altered the prior behavior of consumers in the economy by

Correct AnswerverifiedShow Answer

The fraction, or percentage, of total income that is saved is called the

Correct AnswerverifiedShow Answer

Investment is highly stable; it increases over time at a very steady rate.

Correct AnswerverifiedShow Answer

The saving schedule would be shifted upward by

Correct AnswerverifiedShow Answer

The greater the MPC, the greater the multiplier.

Correct AnswerverifiedShow Answer

The consumption schedule shows

Correct AnswerverifiedShow Answer

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified