Question 1

An upward shift of the saving schedule suggests

Accepted Answer

A)   nothing with respect to changes in the APC and APS; only that the MPS has changed.
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) A) and B)
F) A) and C)

Question 2

The greater the MPC, the greater the multiplier.

Accepted Answer

A) True 
 B)False

Question 3

Dissaving occurs when

Accepted Answer

A)   income is greater than saving.
B)   income is less than consumption.
C)   saving is greater than consumption.
D)   saving is greater than the interest rate.E) B) and C)
F) All of the above

Question 4

If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to

Accepted Answer

A)   save is three-ﬁfths.
B)   consume is one-half.
C)   consume is three-ﬁfths.
D)   consume is two-ﬁfths.E) None of the above
F) A) and B)

Question 5

The real interest rate is

Accepted Answer

A)   the percentage increase in money that the lender receives on a loan.
B)   the percentage increase in purchasing power that the lender receives on a loan.
C)   also called the after-tax interest rate.
D)   usually higher than the nominal interest rate.E) C) and D)
F) None of the above

Question 6

When the marginal propensity to consume is less than 1, the

Accepted Answer

A)   average propensity to consume is greater than 1.
B)   average propensity to save is greater than 1.
C)   marginal propensity to save is negative.
D)   marginal propensity to save is positive.E) A) and B)
F) None of the above

Question 7

The ﬁgure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the highest marginal propensity to consume?

Accepted Answer

A)   1
B)   2
C)   3
D)   4E) None of the above
F) A) and D)

Question 8

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)   $2,500 billion.
B)   $3,000 billion.
C)   $4,000 billion.
D)   $5,000 billion.E) C) and D)
F) A) and C)

Question 9

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) None of the above
F) All of the above

Question 10

Refer to the diagram. Consumption equals disposable income when

Accepted Answer

A)   disposable income is B.
B)   disposable income is D.
C)   CD equals A.
D)   B equals CD.E) A) and C)
F) B) and C)

Question 11

The consumption schedule is drawn on the assumption that as income increases, consumption will

Accepted Answer

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

Question 12

Refer to the given saving schedule. The break-even income would be level

Accepted Answer

A)   0.
B)   1.
C)   2.
D)   3.E) None of the above
F) B) and D)

Question 13

Refer to the consumption schedule shown in the graph. At income level 3, the amount of consumption is represented by the line segment

Accepted Answer

A)   FG.
B)   FH.
C)   FD.
D)   GH.E) A) and C)
F) A) and B)

Question 14

Refer to the diagram. Which of the following would increase investment while leaving an existing investment demand curve, say
 ID2I D _ { 2 }ID2​  , in place?

Accepted Answer

A)   a lower interest rate
B)   a higher interest rate
C)   lower expected returns on investment
D)   higher expected returns on investment E) B) and D)
F) B) and C)

Question 15

Refer to the consumption schedule shown in the graph. The break-even level of income would be at income level

Accepted Answer

A)   0.
B)   1.
C)   2.
D)   3.E) A) and B)
F) B) and C)

Question 16

Assume there are no prospective investment projects (I)  that will yield an expected rate of return (r)  of 25 percent or more, but there are $5 billion of investment opportunities with an expected rate of
Return between 20 and 25 percent, an additional $5 billion between 15 and 20 percent, and so on.
The investment demand curve for this economy is shown in which table?

Accepted Answer

A)    rl25%$10201515201025530035\begin{array} { | c | r | } \hline r & l \\hline 25 \% & \$ 10 \\hline 20 & 15 \\hline 15 & 20 \\hline 10 & 25 \\hline 5 & 30 \\hline 0 & 35 \\hline\end{array}r25%20151050​l$101520253035​​ 
B)    rl25%$020515101015520025\begin{array} { | c | r | } \hline r & l\\hline 25 \% & \$ 0 \\hline 20 & 5 \\hline 15 & 10 \\hline 10 & 15 \\hline 5 & 20 \\hline 0 & 25 \\hline\end{array}r25%20151050​l$0510152025​​ 
C)    rl20%$1015201030540050\begin{array} { | c | c | } \hline r & l \\hline 20 \% & \$ 10 \\hline 15 & 20 \\hline 10 & 30 \\hline 5 & 40 \\hline 0 & 50 \\hline\end{array}r20%151050​l$1020304050​​ 
D)    rl25%$5201015151020525030\begin{array} { | c | c | } \hline r & l \\hline 25 \% & \$ 5 \\hline 20 & 10 \\hline 15 & 15 \\hline 10 & 20 \\hline 5 & 25 \\hline 0 & 30 \\hline\end{array}r25%20151050​l$51015202530​​E) C) and D)
F) None of the above

Question 17

The relationship between the real interest rate and investment is shown by the

Accepted Answer

A)   investment demand schedule.
B)   consumption of ﬁxed capital schedule.
C)   saving schedule.
D)   aggregate supply curve.E) A) and D)
F) All of the above

Question 18

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 goodsE) B) and C)
F) A) and D)

Question 19

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) A) and D)
F) A) and B)

Question 20

The slope of the consumption schedule is measured by the MPC.

Accepted Answer

A) True 
 B)False

Exam 10: Basic Macroeconomic Relationships

Refer to the diagram. Consumption equals disposable income when

Correct Answer
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The APC can be deﬁned as the fraction of a

Correct Answer
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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
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The ﬁgure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the highest marginal propensity to consume?

Correct Answer
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Refer to the consumption schedule shown in the graph. At income level 3, the amount of consumption is represented by the line segment

Correct Answer
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The real interest rate is

Correct Answer
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The slope of the consumption schedule is measured by the MPC.

Correct Answer
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If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to

Correct Answer
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The saving schedule is drawn on the assumption that as income increases,

Correct Answer
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Refer to the consumption schedule shown in the graph. The break-even level of income would be at income level

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

Correct Answer
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The relationship between the real interest rate and investment is shown by the

Correct Answer
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Refer to the given saving schedule. The break-even income would be level

Correct Answer
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The greater the MPC, the greater the multiplier.

Correct Answer
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Correct Answer
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When the marginal propensity to consume is less than 1, the

Correct Answer
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The consumption schedule is drawn on the assumption that as income increases, consumption will

Correct Answer
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An upward shift of the saving schedule suggests

Correct Answer
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Dissaving occurs when

Correct Answer
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Correct Answer
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Exam 10: Basic Macroeconomic Relationships

Refer to the diagram. Consumption equals disposable income when

Correct AnswerverifiedShow Answer

The APC can be deﬁned as the fraction of a

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

The ﬁgure shows the saving schedules for economies 1, 2, 3, and 4. Which economy has the highest marginal propensity to consume?

Correct AnswerverifiedShow Answer

Refer to the consumption schedule shown in the graph. At income level 3, the amount of consumption is represented by the line segment

Correct AnswerverifiedShow Answer

The real interest rate is

Correct AnswerverifiedShow Answer

The slope of the consumption schedule is measured by the MPC.

Correct AnswerverifiedShow Answer

If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the consumption schedule shown in the graph. The break-even level of income would be at income level

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The relationship between the real interest rate and investment is shown by the

Correct AnswerverifiedShow Answer

Refer to the given saving schedule. The break-even income would be level

Correct AnswerverifiedShow Answer

The greater the MPC, the greater the multiplier.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the marginal propensity to consume is less than 1, the

Correct AnswerverifiedShow Answer

The consumption schedule is drawn on the assumption that as income increases, consumption will

Correct AnswerverifiedShow Answer

An upward shift of the saving schedule suggests

Correct AnswerverifiedShow Answer

Dissaving occurs when

Correct AnswerverifiedShow Answer

Refer to the diagram. Which of the following would increase investment while leaving an existing investment demand curve, say ID2I D _ { 2 }ID2​ , in place?

Correct AnswerverifiedShow Answer

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