Question 1

Which of the following would cause a leftward shift in the investment function?

Accepted Answer

A)  technological progress
B)  a reduction in the rate of interest
C)  optimistic expectations about business conditions
D)  an increase in business taxesE) A) and D)
F) B) and D)

Question 2

-Refer to the above figure. The figure represents the saving function for the consumer. Point A represents

Accepted Answer

A)  the amount of autonomous consumption.
B)  a situation in which saving is positive.
C)  a situation in which saving is negative.
D)  the point at which saving equals zero.E) C) and D)
F) A) and B)

Question 3

Along the 45-degree reference line

Accepted Answer

A)  total planned real expenditures = real GDP.
B)  total planned real expenditures = planned nominal expenditures.
C)  total planned nominal expenditures = consumption.
D)  total planned investment spending = planned real expenditures.E) All of the above
F) B) and C)

Question 4

Suppose there is a $200 billion increase in government spending. We know that this increase in government spending will cause which of the following to occur?

Accepted Answer

A)  an increase in equilibrium real GDP and an increase in the multiplier.
B)  an increase in equilibrium real GDP and a reduction in the multiplier.
C)  an increase in equilibrium real GDP and no change in the multiplier.
D)  equilibrium real GDP will increase by exactly $200 billion.E) B) and D)
F) A) and D)

Question 5

-Refer to the above figure. If real disposable income is less than $5,000, then saving is

Accepted Answer

A)  0.
B)  negative.
C)  positive.
D)  none of the above: cannot be determined with the given information.E) A) and D)
F) B) and D)

Question 6

Average propensity to consume

Accepted Answer

A)  is the same as the break-even point.
B)  gives the amount a person changes planned consumption for a change in real disposable income.
C)  is the amount of consumption that is independent of the level of disposable income.
D)  is the proportion of total disposable income that is consumed.E) C) and D)
F) B) and C)

Question 7

Which of the following is a flow variable?

Accepted Answer

A)  savings
B)  wealth
C)  consumption
D)  populationE) A) and D)
F) A) and C)

Question 8

A permanent reduction in net exports leads to

Accepted Answer

A)  a more than proportional decrease in real Gross Domestic Product (GDP) .
B)  a less than proportional decrease in real Gross Domestic Product (GDP) .
C)  a proportional increase in real Gross Domestic Product (GDP) .
D)  a reduction in taxes, autonomous government spending, and a fall in real Gross Domestic Product (GDP) .E) A) and B)
F) A) and C)

Question 9

-Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. What does planned real saving equal when real disposable income equals $12,000?

Accepted Answer

A)  0
B)  600
C)  3,000
D)  11,400E) All of the above
F) B) and D)

Question 10

The multiplier is

Accepted Answer

A)  the part of consumption that is independent of the level of disposable income.
B)  the proportion of total disposable income that is consumed.
C)  the percentage of a given change in income that goes towards consumption.
D)  the number which is multiplied by an autonomous change which gives the change in the equilibrium level of real GDP.E) None of the above
F) A) and B)

Question 11

-In the above table, saving is positive when real disposable income is greater than

Accepted Answer

A)  zero.
B)  $100.
C)  $300.
D)  $500.E) None of the above
F) A) and B)

Question 12

-Refer to the above figure. The figure represents the saving function for the consumer. Point B represents

Accepted Answer

A)  the amount of autonomous consumption.
B)  a situation in which saving is positive.
C)  a situation in which saving is negative.
D)  the point at which saving equals zero.E) A) and D)
F) None of the above

Question 13

The consumption function shifts upward when

Accepted Answer

A)  real income increases.
B)  saving increases.
C)  the real wealth of the average household increases.
D)  population decreases.E) A) and B)
F) C) and D)

Question 14

At a level of real disposable income of 0, consumption is $4000. Then

Accepted Answer

A)  saving equals 0.
B)  saving equals -$4000.
C)  savings equal -$4000.
D)  saving equals $4000.E) A) and B)
F) A) and D)

Question 15

Which of the following is a TRUE statement?

Accepted Answer

A)  The C + I + G + X curve has no relationship to the aggregate demand curve other than some of the variables that affect one curve also affect the other.
B)  The C + I + G + X curve is used to derive the aggregate demand curve, but the C + I + G + X curve is drawn for one price level while price levels vary along the aggregate demand curve.
C)  The C + I + G + X curve is used to derive the aggregate demand curve, but the aggregate demand curve is drawn for one price level.
D)  Both the C + I + G + X curve and the aggregate demand curve are drawn for one price level.E) All of the above
F) B) and C)

Question 16

An increase in the interest rate will cause

Accepted Answer

A)  planned investment spending to increase.
B)  planned investment spending to decrease.
C)  the investment function to shift out.
D)  the investment function to shift in.E) B) and C)
F) A) and D)

Question 17

Which one of the following is TRUE?

Accepted Answer

A)  APC + MPS = 1
B)  APC + APS = 1
C)  MPS + APS = 1
D)  APC * APS = 1E) All of the above
F) B) and D)

Question 18

A higher price level causes

Accepted Answer

A)  the aggregate demand curve to shift to the left.
B)  the aggregate demand curve to shift to the right.
C)  the C + I + G + X curve to shift down.
D)  the C + I + G + X curve to shift up.E) B) and D)
F) None of the above

Question 19

Consumption expenditures include all of the following EXCEPT

Accepted Answer

A)  buying a pizza.
B)  going to a concert.
C)  having your house cleaned by Klean Maids.
D)  purchasing a share of stock.E) A) and D)
F) A) and C)

Question 20

The ratio of the change in consumption to the change in disposable income is the

Accepted Answer

A)  marginal propensity to consume.
B)  marginal propensity to save.
C)  average propensity to consume.
D)  average propensity to save.E) A) and B)
F) A) and C)

Exam 11: Consumption, Real GDP, and the Multiplier

Consumption expenditures include all of the following EXCEPT

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A permanent reduction in net exports leads to

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-In the above table, saving is positive when real disposable income is greater than

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At a level of real disposable income of 0, consumption is $4000. Then

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-Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. What does planned real saving equal when real disposable income equals $12,000?

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-Refer to the above figure. The figure represents the saving function for the consumer. Point A represents

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The consumption function shifts upward when

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Which of the following is a TRUE statement?

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Average propensity to consume

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Which of the following would cause a leftward shift in the investment function?

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Along the 45-degree reference line

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Which of the following is a flow variable?

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-Refer to the above figure. The figure represents the saving function for the consumer. Point B represents

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The multiplier is

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Suppose there is a $200 billion increase in government spending. We know that this increase in government spending will cause which of the following to occur?

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Which one of the following is TRUE?

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The ratio of the change in consumption to the change in disposable income is the

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A higher price level causes

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An increase in the interest rate will cause

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-Refer to the above figure. If real disposable income is less than $5,000, then saving is

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