Question 1

Which of the following equations correctly represents the data below? d = 40 + .6C B) C = 60 + .4Yd C) C = 40 + .6Yd D) C = .6Yd" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  Yd = 40 + .6C
B)  C = 60 + .4Yd
C)  C = 40 + .6Yd
D)  C = .6YdE) None of the above
F) A) and B)

Question 2

The simple multiplier applies:

Accepted Answer

A)  only when an inflationary gap exists.
B)  to shifts in the consumption and investment schedules.
C)  only to shifts in the investment schedule.
D)  only to shifts in the consumption schedule.E) A) and D)
F) C) and D)

Question 3

The simple multiplier is:

Accepted Answer

A)  1/APS.
B)  1/APC.
C)  1/MPC.
D)  1/MPS.E) C) and D)
F) All of the above

Question 4

If the MPC is .70 and gross investment increases by $3 billion, the equilibrium GDP will:

Accepted Answer

A)  increase by about $10 billion.
B)  increase by $2.10 billion.
C)  decrease by $4.29 billion.
D)  increase by $4.29 billion.E) C) and D)
F) A) and B)

Question 5

If the marginal propensity to consume is 0.9 in a private closed economy, a $20 billion decline in investment spending will decrease:

Accepted Answer

A)  GDP by $20 billion.
B)  GDP by $100 billion.
C)  saving by $20 billion.
D)  consumption by $200 billion.E) None of the above
F) A) and D)

Question 6

Which of the following is likely to happen as disposable income increases?

Accepted Answer

A)  Savings and consumption both increase.
B)  Savings increases, and consumption decreases.
C)  Savings decreases, and consumption increases.
D)  Savings and consumption both decrease.E) None of the above
F) All of the above

Question 7

A decline in the real interest rate will:

Accepted Answer

A)  increase the amount of investment spending.
B)  shift the investment schedule downward.
C)  shift the investment-demand curve to the right.
D)  shift the investment-demand curve to the left.E) B) and C)
F) A) and C)

Question 8

The APC 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)  specific level of total income which is not consumed.
D)  specific level of total income which is consumed.E) A) and B)
F) A) and D)

Question 9

The increase in income which results from an increase in investment spending would be greater the:

Accepted Answer

A)  smaller the MPS.
B)  smaller the APC.
C)  larger the MPS.
D)  smaller the MPC.E) A) and B)
F) A) and C)

Question 10

If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round, the multiplier in the economy is:

Accepted Answer

A)  2
B)  3.33.
C)  5
D)  10E) A) and C)
F) None of the above

Question 11

The multiplier is equal to the reciprocal of the MPC.

Accepted Answer

A) True 
 B)False

Question 12

The consumption schedule shows:

Accepted Answer

A)  a direct relationship between aggregate consumption and accumulated wealth.
B)  a direct relationship between aggregate consumption and aggregate income.
C)  an inverse relationship between aggregate consumption and accumulated financial wealth.
D)  an inverse relationship between aggregate consumption and aggregate income.E) A) and D)
F) A) and C)

Question 13

A $1 billion increase in investment will cause a:

Accepted Answer

A)  (1/MPS)  billion increase in equilibrium GDP.
B)  (MPS)  billion increase in equilibrium GDP.
C)  (1 - MP
C)   billion increase in equilibrium GDP.
D)  (MPC - MPS)  billion increase in equilibrium GDP.E) None of the above
F) B) and C)

Question 14

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

Question 15

The above schedule indicates that if the real interest rate is 8 percent, then:

Accepted Answer

A)  we cannot tell what volume of investment will be profitable.
B)  $30 billion will be both saved and invested.
C)  $30 billion of investment will be undertaken.
D)  $60 billion of investment will be undertaken.E) A) and D)
F) A) and C)

Question 16

Holly's break-even level of income is $10,000 and her MPC is 0.75.If her actual disposable income is $16,000, her level of:

Accepted Answer

A)  consumption spending will be $14,500.
B)  consumption spending will be $4,500.
C)  consumption spending will be $13,000.
D)  saving will be $2,500.E) A) and D)
F) C) and D)

Question 17

The initial costs of capital goods, and the estimated costs of operating and maintaining those goods, affect the expected rate of return on investment.

Accepted Answer

A) True 
 B)False

Question 18

Suppose the consumption schedule is: C = 20 + .9Y, where C is consumption and Y is disposable income.Refer to the above data.The MPC is:

Accepted Answer

A)  .45.
B)  .20.
C)  .50.
D)  .90.E) A) and B)
F) A) and C)

Question 19

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

Accepted Answer

A)  an increase in the excess productive capacity available in industry.
B)  an increase in business taxes.
C)  technological progress.
D)  an increase in the acquisition and maintenance cost of capital goods.E) None of the above
F) B) and C)

Question 20

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)

Exam 10: B: Basic Macroeconomic Relationships

Holly's break-even level of income is $10,000 and her MPC is 0.75.If her actual disposable income is $16,000, her level of:

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The consumption schedule shows:

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If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round, the multiplier in the economy is:

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A $1 billion increase in investment will cause a:

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Dissaving means:

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The simple multiplier applies:

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Which of the following is likely to happen as disposable income increases?

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The simple multiplier is defined as:

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Suppose the consumption schedule is: C = 20 + .9Y, where C is consumption and Y is disposable income.Refer to the above data.The MPC is:

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The simple multiplier is:

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If the marginal propensity to consume is 0.9 in a private closed economy, a $20 billion decline in investment spending will decrease:

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The multiplier is equal to the reciprocal of the MPC.

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The initial costs of capital goods, and the estimated costs of operating and maintaining those goods, affect the expected rate of return on investment.

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If the MPC is .70 and gross investment increases by $3 billion, the equilibrium GDP will:

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Which of the following equations correctly represents the data below?

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The above schedule indicates that if the real interest rate is 8 percent, then:

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The APC can be defined as the fraction of a:

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A decline in the real interest rate will:

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

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The increase in income which results from an increase in investment spending would be greater the:

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