Question 1

If the real interest rate in the economy is i and the expected rate of return from additional investment is r,then other things equal:

Accepted Answer

A)   more investment will be forthcoming when i exceeds r.
B)   less investment will be forthcoming when r rises.
C)   r will fall as more investment is undertaken.
D)   r will exceed i at all possible levels of investment.E) A) and B)
F) A) and C)

Question 2

When we draw an investment demand curve we hold constant all of the following except:

Accepted Answer

A)   the expected rate of return from the investment.
B)   the interest rate.
C)   business taxes.
D)   the present stock of capital goods.E) A) and D)
F) All of the above

Question 3

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.
 
-Refer to the above data.At an income level of $40 billion,the average propensity to consume:

Accepted Answer

A)   is highest in economy (1) .
B)   is highest in economy (2) .
C)   is highest in economy (3) .
D)   cannot be determined from the data given.E) C) and D)
F) A) and B)

Question 4

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.
 
-Refer to the above data.Suppose that consumption increased by $2 billion at each level of DI in each of the three countries.We can conclude that the:

Accepted Answer

A)   marginal propensity to consume will remain unchanged in each of the three countries.
B)   marginal propensity to consume will decline in each of the three countries.
C)   average propensity to save will fall at each level of DI in each of the three countries.
D)   marginal propensity to save will rise in each of the three countries.E) A) and C)
F) A) and B)

Question 5

The slope of the consumption schedule is equal to the marginal propensity to consume.

Accepted Answer

A) True 
 B)False

Question 6

The consumption schedule is such that:

Accepted Answer

A)   both the APC and the MPC increase as income rises.
B)   the APC is constant and the MPC declines as income rises.
C)   the MPC is constant and the APC declines as income rises.
D)   the MPC and APC must be equal at all levels of income.E) A) and D)
F) A) and B)

Question 7

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.
 
-Refer to the above data.The marginal propensity to save:

Accepted Answer

A)   is highest in economy (1) .
B)   is highest in economy (2) .
C)   is highest in economy (3) .
D)   cannot be determined from the data given.E) B) and C)
F) A) and D)

Question 8

d = -20 + .8S. B)  Yd = 20 + .2S. C)  S = 20 + .8Yd. D)  S = -20 + .2Yd." class="answers-bank-image d-inline" rel="preload" >
-The equation for the above saving schedule is:

Accepted Answer

A)   Yd = -20 + .8S.
B)   Yd = 20 + .2S.
C)   S = 20 + .8Yd.
D)   S = -20 + .2Yd.E) B) and C)
F) All of the above

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 debt outstanding
B)   an increase in disposable income
C)   an increase in stock prices
D)   an increase in interest ratesE) All of the above
F) A) and D)

Question 10

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

Accepted Answer

A)   CD/EF.
B)   CB/CF.
C)   CB/AF.
D)   EF/CB.E) B) and C)
F) A) and B)

Question 11

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) A) and B)
F) A) and C)

Question 12

If the MPS is only half as large as the MPC,the multiplier:

Accepted Answer

A)   is 2.
B)   is 3.
C)   is 4.
D)   cannot be determined from the information given.E) A) and D)
F) C) and D)

Question 13

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 D)
F) B) and C)

Question 14

If the real interest rate in the economy is i and the expected rate of return from additional investment is r,then more investment will be forthcoming when:

Accepted Answer

A)   r is greater than i.
B)   i is greater than r.
C)   r falls.
D)   i rises.E) A) and C)
F) A) and B)

Question 15

Suppose that the level of GDP increased by $100 billion in an economy where the marginal propensity to consume is 0.5.The initial change in spending must have been:

Accepted Answer

A)   $100 billion.
B)   $50 billion.
C)   $500 billion.
D)   $5 billion.E) B) and C)
F) All of the above

Question 16

Assume the saving schedule for a private closed economy is S = -20 + 0.2Y,where S is saving and Y is gross domestic product.The multiplier for this economy:

Accepted Answer

A)   is 3.
B)   is 4.
C)   is 5.
D)   cannot be determined from the information given.E) B) and D)
F) A) and D)

Question 17

If a $500 billion increase in investment spending increases income by $500 billion in the first round of the multiplier process and by $450 in the second round,income will eventually increase by:

Accepted Answer

A)   $2500 billion.
B)   $3000 billion.
C)   $4000 billion.
D)   $5000 billion.E) B) and D)
F) B) and C)

Question 18

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

Accepted Answer

A)   0.25
B)   .75.
C)   .20.
D)   .80.E) B) and D)
F) All of the above

Question 19

-Refer to the above diagram.At disposable income level D,the average propensity to save is equal to:

Accepted Answer

A)   CD/BD.
B)   CD/OD.
C)   OD/CD.
D)   OA/OB.E) A) and C)
F) A) and D)

Question 20

In view of your answer to the previous question,if the real interest rate is 15 percent in this economy,the aggregate amount of investment will be:

Accepted Answer

A)   $25
B)   $20
C)   $15
D)   $10E) A) and D)
F) A) and B)

Exam 10: Basic Macroeconomic Relationships

If the real interest rate in the economy is i and the expected rate of return from additional investment is r,then more investment will be forthcoming when:

Correct Answer
verified

If a $500 billion increase in investment spending increases income by $500 billion in the first round of the multiplier process and by $450 in the second round,income will eventually increase by:

Correct Answer
verified

-Refer to the above diagram.At disposable income level D,the average propensity to save is equal to:

Correct Answer
verified

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

Correct Answer
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The consumption schedule is such that:

Correct Answer
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If the MPS is only half as large as the MPC,the multiplier:

Correct Answer
verified

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

Correct Answer
verified

If the real interest rate in the economy is i and the expected rate of return from additional investment is r,then other things equal:

Correct Answer
verified

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. -Refer to the above data.At an income level of $40 billion,the average propensity to consume:

Correct Answer
verified

Suppose that the level of GDP increased by $100 billion in an economy where the marginal propensity to consume is 0.5.The initial change in spending must have been:

Correct Answer
verified

The slope of the consumption schedule is equal to the marginal propensity to consume.

Correct Answer
verified

When we draw an investment demand curve we hold constant all of the following except:

Correct Answer
verified

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

Correct Answer
verified

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:

Correct Answer
verified

Assume the saving schedule for a private closed economy is S = -20 + 0.2Y,where S is saving and Y is gross domestic product.The multiplier for this economy:

Correct Answer
verified

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. -Refer to the above data.The marginal propensity to save:

Correct Answer
verified

Correct Answer
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-The equation for the above saving schedule is:

Correct Answer
verified

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

Correct Answer
verified

In view of your answer to the previous question,if the real interest rate is 15 percent in this economy,the aggregate amount of investment will be:

Correct Answer
verified

Exam 10: Basic Macroeconomic Relationships

If the real interest rate in the economy is i and the expected rate of return from additional investment is r,then more investment will be forthcoming when:

Correct AnswerverifiedShow Answer

If a $500 billion increase in investment spending increases income by $500 billion in the first round of the multiplier process and by $450 in the second round,income will eventually increase by:

Correct AnswerverifiedShow Answer

-Refer to the above diagram.At disposable income level D,the average propensity to save is equal to:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The consumption schedule is such that:

Correct AnswerverifiedShow Answer

If the MPS is only half as large as the MPC,the multiplier:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the real interest rate in the economy is i and the expected rate of return from additional investment is r,then other things equal:

Correct AnswerverifiedShow Answer

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. -Refer to the above data.At an income level of $40 billion,the average propensity to consume:

Correct AnswerverifiedShow Answer

Suppose that the level of GDP increased by $100 billion in an economy where the marginal propensity to consume is 0.5.The initial change in spending must have been:

Correct AnswerverifiedShow Answer

The slope of the consumption schedule is equal to the marginal propensity to consume.

Correct AnswerverifiedShow Answer

When we draw an investment demand curve we hold constant all of the following except:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Assume the saving schedule for a private closed economy is S = -20 + 0.2Y,where S is saving and Y is gross domestic product.The multiplier for this economy:

Correct AnswerverifiedShow Answer

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars. -Refer to the above data.The marginal propensity to save:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

-The equation for the above saving schedule is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In view of your answer to the previous question,if the real interest rate is 15 percent in this economy,the aggregate amount of investment will be:

Correct AnswerverifiedShow Answer

Correct Answer
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