Question 1

The following table illustrates the multiplier process in a private closed economy:
 
-Refer to the above table.The multiplier in this economy is:

Accepted Answer

A)   2
B)   4
C)   5
D)   10E) A) and B)
F) A) and D)

Question 2

The simple multiplier is:

Accepted Answer

A)   1/APS.
B)   1/APC.
C)   1/MPC.
D)   1/MPS.E) A) and D)
F) B) and D)

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

If the inflation rate is 10 percent and the real interest rate is 12 percent,the nominal interest rate is:

Accepted Answer

A)   2 percent.
B)   zero percent.
C)   10 percent.
D)   22 percent.E) A) and C)
F) A) and B)

Question 5

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

Accepted Answer

A)   zero.
B)   150
C)   60
D)   120E) A) and B)
F) None of the above

Question 6

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

Question 7

If the equation C = 20 + .6Y,where C is consumption and Y is disposable income,were graphed:

Accepted Answer

A)   the vertical intercept would be +.6 and the slope would be +20.
B)   it would reveal an inverse relationship between consumption and disposable income.
C)   the vertical intercept would be negative,but consumption would increase as disposable income rises.
D)   the vertical intercept would be +20 and the slope would be +.6.E) All of the above
F) A) and B)

Question 8

Given the expected rate of return on all possible investment opportunities in the economy:

Accepted Answer

A)   an increase in the real rate of interest will reduce the level of investment.
B)   a decrease in the real rate of interest will reduce the level of investment.
C)   a change in the real interest rate will have no impact upon the level of investment.
D)   an increase in the real interest rate will increase the level of investment.E) B) and D)
F) A) and B)

Question 9

Suppose the economy's saving schedule shifts from S1 to S 2 as shown in the below diagram.We can say that its: 1 to S 2 as shown in the below diagram.We can say that its:   A)  MPC has increased. B)  MPS has increased. C)  APS has increased at all levels of disposable income. D)  APS has decreased at all levels of disposable income." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   MPC has increased.
B)   MPS has increased.
C)   APS has increased at all levels of disposable income.
D)   APS has decreased at all levels of disposable income.E) All of the above
F) A) and D)

Question 10

If business taxes are reduced and the real interest rate increases:

Accepted Answer

A)   consumption and saving will necessarily increase.
B)   the level of investment spending might either increase or decrease.
C)   the level of investment spending will necessarily increase.
D)   the level of investment spending will necessarily decrease.E) A) and B)
F) A) and C)

Question 11

Assume the economy's consumption and saving schedules simultaneously shift downward.This must be the result of:

Accepted Answer

A)   an increase in disposable income.
B)   an increase in household wealth.
C)   the expectation of a recession.
D)   an increase in personal taxesE) A) and B)
F) None of the above

Question 12

Which of the following is the primary explanation for most of the fluctuations in output and employment over the course of the business cycle?

Accepted Answer

A)   changes in net exports
B)   changes in the marginal propensity to consume
C)   abrupt changes in stock market prices
D)   changes in investment expendituresE) B) and C)
F) B) and D)

Question 13

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

Question 14

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

Accepted Answer

A)   AE/0E.
B)   CB/AB.
C)   CF/CD.
D)   CD/CF.E) None of the above
F) B) and D)

Question 15

The following table illustrates the multiplier process in a private closed economy:
 
-Refer to the above table.The marginal propensity to consume is:

Accepted Answer

A)   .5.
B)   .8.
C)   .75.
D)   .9.E) None of the above
F) A) and B)

Question 16

If the MPC is .8 and the disposable income is $200,then

Accepted Answer

A)   consumption and saving cannot be determined from the information given.
B)   saving will be $20.
C)   personal consumption expenditures will be $80.
D)   saving will be $40.E) A) and C)
F) All of the above

Question 17

If Smith's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100,it may be concluded that her marginal propensity to:

Accepted Answer

A)   save is three-fifths.
B)   consume is one-half.
C)   consume is three-fifths.
D)   consume is one-sixth.E) B) and D)
F) A) and B)

Question 18

The practical significance of the multiplier is that it:

Accepted Answer

A)   brings about an equality of planned investment and saving.
B)   magnifies relatively small initial changes in spending into larger changes in GDP.
C)   keeps inflation within tolerable limits.
D)   helps to stabilize the economy.E) B) and C)
F) A) and C)

Question 19

If Ben's MPC is .80,this means that he will:

Accepted Answer

A)   spend eight-tenths of any increase in his disposable income.
B)   spend eight-tenths of any level of disposable income.
C)   break even when his disposable income is $8,000.
D)   save eight-tenths of any level of disposable income.E) B) and D)
F) All of the above

Question 20

With an MPS of .4,the MPC will be:

Accepted Answer

A)   1.0 minus .4.
B)   .4 minus 1.0.
C)   the reciprocal of the MPS.
D)   .4.E) B) and D)
F) A) and D)

Exam 10: Basic Macroeconomic Relationships

If the MPC is .8 and the disposable income is $200,then

Correct AnswerverifiedShow Answer

Given the expected rate of return on all possible investment opportunities in the economy:

Correct AnswerverifiedShow Answer

Which of the following is the primary explanation for most of the fluctuations in output and employment over the course of the business cycle?

Correct AnswerverifiedShow Answer

The following table illustrates the multiplier process in a private closed economy: -Refer to the above table.The marginal propensity to consume is:

Correct AnswerverifiedShow Answer

If business taxes are reduced and the real interest rate increases:

Correct AnswerverifiedShow Answer

The practical significance of the multiplier is that it:

Correct AnswerverifiedShow Answer

If the inflation rate is 10 percent and the real interest rate is 12 percent,the nominal interest rate is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The consumption schedule shows:

Correct AnswerverifiedShow Answer

If the equation C = 20 + .6Y,where C is consumption and Y is disposable income,were graphed:

Correct AnswerverifiedShow Answer

The following table illustrates the multiplier process in a private closed economy: -Refer to the above table.The multiplier in this economy is:

Correct AnswerverifiedShow Answer

If Smith's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100,it may be concluded that her marginal propensity to:

Correct AnswerverifiedShow Answer

With an MPS of .4,the MPC will be:

Correct AnswerverifiedShow Answer

The simple multiplier is:

Correct AnswerverifiedShow Answer

Suppose the economy's saving schedule shifts from S1 to S 2 as shown in the below diagram.We can say that its:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If Ben's MPC is .80,this means that he will:

Correct AnswerverifiedShow Answer

Assume the economy's consumption and saving schedules simultaneously shift downward.This must be the result of:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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

Suppose the economy's saving schedule shifts from S₁ to S ₂ as shown in the below diagram.We can say that its:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified