Question 1

-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 $6,000?

Accepted Answer

A)  -3,000
B)  -1,200
C)  0
D)  7,200E) B) and C)
F) All of the above

Question 2

In the Keynesian model, planned investment is inversely related to

Accepted Answer

A)  the interest rate.
B)  the level of income.
C)  the wage rate.
D)  the tax rate.E) B) and D)
F) All of the above

Question 3

The multiplier is the ratio of the

Accepted Answer

A)  change in the equilibrium level of real GDP to the change in autonomous expenditures.
B)  equilibrium level of real GDP to the change in induced expenditures.
C)  change in induced expenditures to the change in autonomous expenditures.
D)  change in autonomous expenditures to the change in the equilibrium level of real GDP.E) B) and C)
F) A) and D)

Question 4

The marginal propensity to consume is

Accepted Answer

A)  real consumption/real disposable income.
B)  real saving/real disposable income.
C)  change in real consumption/change in real disposable income.
D)  change in real saving/change in real disposable income.E) A) and D)
F) B) and C)

Question 5

If the average propensity to save (APS) is 0.60, then this means

Accepted Answer

A)  people are saving 60 percent of their disposable income.
B)  people are spending 60 percent of their disposable income.
C)  the marginal tax rate is 60.
D)  the government spends 60 percent of its revenues.E) A) and B)
F) A) and C)

Question 6

When the equilibrium price level adjusts to an increase in autonomous investment spending, the impact of the multiplier effect resulting from that spending increase

Accepted Answer

A)  will increase real GDP by an amount smaller than the multiplier effect would indicate.
B)  will increase nominal GDP by an amount smaller than the multiplier effect would indicate.
C)  will have no impact on the real GDP.
D)  is only felt when there are changes in consumption.E) A) and B)
F) All of the above

Question 7

-Refer to the above figure. If real GDP is $4 trillion, then

Accepted Answer

A)  consumption expenditures are too low.
B)  unplanned inventories will decrease.
C)  unplanned inventories will increase.
D)  actual investment spending equals $1 trillion as planned investment spending plus unplanned inventory increases equal $1 trillion.E) All of the above
F) A) and D)

Question 8

It is conceivable that the APC, APS, MPC, and MPS could simultaneously be

Accepted Answer

A)  APC = 1.0; APS = 0.1; MPC = 0.8; MPS = 0.25.
B)  APC = 0.8; APS = 0.2; MPC = 1.1; MPS = 0.1.
C)  APC = 1.3; APS = -0.3; MPC = 0.9; MPS = 0.1.
D)  APC = 1.0; APS = 0; MPC = 1.0; MPS = 0.15.E) B) and C)
F) A) and C)

Question 9

The consumption function shows the relationship

Accepted Answer

A)  between households' disposable income and their consumption spending.
B)  between investment and rate of return.
C)  between consumption spending and capital gains.
D)  between government spending and tax collection.E) B) and C)
F) C) and D)

Question 10

If the multiplier in the economy is 3, the marginal propensity to save (MPS) must be

Accepted Answer

A)  0.33.
B)  0.67.
C)  1.
D)  3.E) A) and D)
F) A) and C)

Question 11

Investment includes spending on

Accepted Answer

A)  capital goods, buildings, and consumer durable goods.
B)  capital goods, buildings, and changes in business inventories.
C)  capital goods, consumer durable goods, and changes in business inventories.
D)  capital goods, buildings, and changes in business savings.E) A) and D)
F) None of the above

Question 12

The consumption function will shift with

Accepted Answer

A)  an increase in real disposable income.
B)  a change in saving.
C)  a decrease in real disposable income.
D)  a change in household wealth.E) B) and C)
F) C) and D)

Question 13

Which of the following would increase the level of planned real investment?

Accepted Answer

A)  an increase in the interest rate
B)  an expectation of higher future profits
C)  an expectation of higher future costs
D)  an increase in business taxesE) A) and D)
F) A) and B)

Question 14

Whenever total planned expenditures differ from real GDP

Accepted Answer

A)  unplanned inventories will remain unchanged.
B)  unplanned inventories will change.
C)  government spending will adjust.
D)  tax revenues will move the economy back to equilibrium.E) All of the above
F) A) and C)

Question 15

The larger is the marginal propensity to consume (MPC)

Accepted Answer

A)  the larger is the multiplier.
B)  the smaller is the multiplier.
C)  the smaller is the slope of the consumption function.
D)  the larger is the slope of the saving function.E) None of the above
F) A) and B)

Question 16

Suppose government spending decreases by $100 billion and the marginal propensity to consume (MPC) is 0.8. Given this information, this decrease in government spending will cause a(n)

Accepted Answer

A)  increase in equilibrium real GDP equal to $500 billion.
B)  increase in equilibrium real GDP equal to $800 billion.
C)  decrease in equilibrium real GDP equal to $500 billion.
D)  decrease in equilibrium real GDP equal to $800 billion.E) B) and C)
F) A) and B)

Question 17

What would happen to the planned investment function if business taxes were increased?

Accepted Answer

A)  It would shift to the right.
B)  It would shift to the left.
C)  It would shift upward.
D)  There would be no change.E) A) and B)
F) A) and C)

Question 18

The relationship between real consumption spending and real disposable income

Accepted Answer

A)  is direct.
B)  is inverse.
C)  plots a vertical line.
D)  plots a horizontal line.E) None of the above
F) A) and B)

Question 19

-Refer to the above figure. If real disposable income is $30,000, saving is

Accepted Answer

A)  $0.
B)  $4000.
C)  $5000.
D)  $6000.E) A) and D)
F) B) and D)

Question 20

Which of the following is FALSE?

Accepted Answer

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

Exam 11: Consumption, Real GDP, and the Multiplier

If the average propensity to save (APS) is 0.60, then this means

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What would happen to the planned investment function if business taxes were increased?

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If the multiplier in the economy is 3, the marginal propensity to save (MPS) must be

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It is conceivable that the APC, APS, MPC, and MPS could simultaneously be

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The larger is the marginal propensity to consume (MPC)

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When the equilibrium price level adjusts to an increase in autonomous investment spending, the impact of the multiplier effect resulting from that spending increase

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Whenever total planned expenditures differ from real GDP

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Which of the following is FALSE?

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The marginal propensity to consume is

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Investment includes spending on

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The multiplier is the ratio of the

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The consumption function will shift with

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In the Keynesian model, planned investment is inversely related to

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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 $6,000?

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Suppose government spending decreases by $100 billion and the marginal propensity to consume (MPC) is 0.8. Given this information, this decrease in government spending will cause a(n)

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-Refer to the above figure. If real GDP is $4 trillion, then

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-Refer to the above figure. If real disposable income is $30,000, saving is

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The relationship between real consumption spending and real disposable income

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Which of the following would increase the level of planned real investment?

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The consumption function shows the relationship

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