Question 1

The saving schedule is drawn on the assumption that as income increases:

Accepted Answer

A)   saving will decline absolutely and as a percentage of income.
B)   saving will increase absolutely but remain constant as a percentage of income.
C)   saving will increase absolutely but decline as a percentage of income.
D)   saving will increase absolutely and as a percentage of income.E) A) and D)
F) B) and D)

Question 2

Answer the question on the basis of the following table that illustrates the multiplier process.  Refer to the given table.The change in income in round two will be:

Accepted Answer

A)   $4.
B)   $16.
C)   $20.
D)   $24.E) All of the above
F) A) and B)

Question 3

The 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) C) and D)
F) B) and D)

Question 4

Other things equal,a decrease in the real interest rate will:

Accepted Answer

A)   shift the investment demand curve to the right.
B)   shift the investment demand curve to the left.
C)   move the economy upward along its existing investment demand curve.
D)   move the economy downward along its existing investment demand curve.E) B) and D)
F) All of the above

Question 5

An upward shift of the saving schedule suggests:

Accepted Answer

A)   nothing with respect to changes in the APC and APS.
B)   that the APC and APS have both decreased at each GDP level.
C)   that the APC and APS have both increased at each GDP level.
D)   that the APC has decreased and the APS has increased at each GDP level.E) None of the above
F) B) and C)

Question 6

Answer the question on the basis of the following information for a private closed economy.Assume that for the entire business sector of the economy there is $0 worth of investment projects that will yield an expected rate of return of 25 percent or more.But there are $15 worth of investments that will yield an expected rate of return of 20-25 percent;another $15 with an expected rate of return of 15-20 percent;and similarly an additional $15 of investment projects in each successive rate of return range down to and including the 0-5 percent range. Refer to the given information.The expected rate of return curve:

Accepted Answer

A)   shows a direct relationship between the interest rate and investment.
B)   is also the investment demand curve.
C)   is indeterminate.
D)   implies a direct (positive) relationship between the interest rate and the level of GDP.E) B) and C)
F) A) and C)

Question 7

Which of the following will not tend to shift the consumption schedule upward?

Accepted Answer

A)   A currently small stock of durable goods in the possession of consumers.
B)   The expectation of a future decline in the consumer price index.
C)   A currently low level of household debt.
D)   The expectation of future shortages of essential consumer goods.E) All of the above
F) B) and D)

Question 8

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 the price level.E) A) and B)
F) A) and C)

Question 9

Which one of the following will cause a movement up along an economy's saving schedule?

Accepted Answer

A)   An increase in household borrowing.
B)   An increase in disposable income.
C)   An increase in stock prices.
D)   An increase in interest rates.E) All of the above
F) B) and C)

Question 10

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.  Refer to the given data.A $2 billion increase in consumption at each level of DI could be caused by:

Accepted Answer

A)   a decrease in consumer wealth.
B)   new expectations of higher future income.
C)   an increase in taxation.
D)   an increase in saving.E) A) and D)
F) A) and C)

Question 11

(Consider This) During the Great Recession of 2007-2009,both real interest rates and investment spending declined.This suggests that:

Accepted Answer

A)   the investment demand curve was positively sloped during this period.
B)   purchases of capital from abroad increased,and these were not reflected in investment spending figures for that period.
C)   firms were optimistic about future sales.
D)   the investment demand curve shifted inward.E) A) and B)
F) B) and D)

Question 12

If the consumption schedule shifts upward and the shift was not caused by a tax change,the saving schedule:

Accepted Answer

A)   will not shift.
B)   may shift either upward or downward.
C)   will shift downward.
D)   will also shift upward.E) None of the above
F) All of the above

Question 13

If DI is $275 billion and the APC is 0.8,we can conclude that saving is $55 billion.

Accepted Answer

A) True 
 B)False

Question 14

The APC can be defined as the fraction of a:

Accepted Answer

A)   change in income that is not spent.
B)   change in income that is spent.
C)   specific level of total income that is not consumed.
D)   specific level of total income that is consumed.E) C) and D)
F) B) and C)

Question 15

The multiplier is equal to the reciprocal of the MPC.

Accepted Answer

A) True 
 B)False

Question 16

Answer the question on the basis of the following information for a private closed economy.Assume that for the entire business sector of the economy there is $0 worth of investment projects that will yield an expected rate of return of 25 percent or more.But there are $15 worth of investments that will yield an expected rate of return of 20-25 percent;another $15 with an expected rate of return of 15-20 percent;and similarly an additional $15 of investment projects in each successive rate of return range down to and including the 0-5 percent range. Refer to the given information.If the real interest rate is 5 percent,what amount of investment will be undertaken?

Accepted Answer

A)   $15.
B)   $30.
C)   $45.
D)   $60.E) C) and D)
F) All of the above

Question 17

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.  (Advanced analysis) Refer to the given data.When plotted on a graph,the vertical intercept of the consumption schedule in economy (3) is _____ and the slope is _____.

Accepted Answer

A)   minus $2;.9
B)   $2;.18
C)   $100;.5
D)   $2;.9E) A) and C)
F) A) and D)

Question 18

When consumption and saving are graphed relative to real GDP,an increase in personal taxes will shift:

Accepted Answer

A)   both the consumption and saving schedules downward.
B)   both the consumption and saving schedules upward.
C)   the consumption schedule upward and the saving schedule downward.
D)   the consumption schedule downward and the saving schedule upward.E) A) and B)
F) B) and D)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

(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) B) and C)
F) C) and D)

Exam 29: Basic Macroeconomic Relationships

Which of the following will not tend to shift the consumption schedule upward?

Correct Answer
verified

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

Correct Answer
verified

If DI is $275 billion and the APC is 0.8,we can conclude that saving is $55 billion.

Correct Answer
verified

(Consider This) During the Great Recession of 2007-2009,both real interest rates and investment spending declined.This suggests that:

Correct Answer
verified

The consumption schedule shows:

Correct Answer
verified

Other things equal,a decrease in the real interest rate will:

Correct Answer
verified

The saving schedule is drawn on the assumption that as income increases:

Correct Answer
verified

Correct Answer
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When consumption and saving are graphed relative to real GDP,an increase in personal taxes will shift:

Correct Answer
verified

Answer the question on the basis of the following table that illustrates the multiplier process. Refer to the given table.The change in income in round two will be:

Correct Answer
verified

Correct Answer
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The multiplier is equal to the reciprocal of the MPC.

Correct Answer
verified

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

Correct Answer
verified

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the given data.A $2 billion increase in consumption at each level of DI could be caused by:

Correct Answer
verified

Which one of the following will cause a movement up along an economy's saving schedule?

Correct Answer
verified

The multiplier is defined as:

Correct Answer
verified

The APC can be defined as the fraction of a:

Correct Answer
verified

If the consumption schedule shifts upward and the shift was not caused by a tax change,the saving schedule:

Correct Answer
verified

Correct Answer
verified

An upward shift of the saving schedule suggests:

Correct Answer
verified

Exam 29: Basic Macroeconomic Relationships

Which of the following will not tend to shift the consumption schedule upward?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If DI is $275 billion and the APC is 0.8,we can conclude that saving is $55 billion.

Correct AnswerverifiedShow Answer

(Consider This) During the Great Recession of 2007-2009,both real interest rates and investment spending declined.This suggests that:

Correct AnswerverifiedShow Answer

The consumption schedule shows:

Correct AnswerverifiedShow Answer

Other things equal,a decrease in the real interest rate will:

Correct AnswerverifiedShow Answer

The saving schedule is drawn on the assumption that as income increases:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When consumption and saving are graphed relative to real GDP,an increase in personal taxes will shift:

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following table that illustrates the multiplier process. Refer to the given table.The change in income in round two will be:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The multiplier is equal to the reciprocal of the MPC.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following consumption schedules.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. Refer to the given data.A $2 billion increase in consumption at each level of DI could be caused by:

Correct AnswerverifiedShow Answer

Which one of the following will cause a movement up along an economy's saving schedule?

Correct AnswerverifiedShow Answer

The multiplier is defined as:

Correct AnswerverifiedShow Answer

The APC can be defined as the fraction of a:

Correct AnswerverifiedShow Answer

If the consumption schedule shifts upward and the shift was not caused by a tax change,the saving schedule:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An upward shift of the saving schedule suggests:

Correct AnswerverifiedShow Answer

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