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macro chapter 10 – Flashcards

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14 July 2022

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Personal saving is equal to:

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Disposable income minus consumption.

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The amount of consumption in an economy correlates:

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Directly with the level of disposable income

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When a consumption schedule is plotted as a straight line, the slope of the consumption line is:

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Less than the slope of the 45 (degree) line.

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When the consumption schedule is plotted on a graph:

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Consumption is on the vertical axis and disposable income is on the horizontal axis

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At income level 3, the amount of saving is represented by the line segment:

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Disposable income equals consumption at point:

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As income falls from level 3 to level 2, the amount of:

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Consumption decreases and the amount of saving decreases

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The slope of the consumption schedule between two points is :

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The ratio of the change in consumption to the change in disposable income between those two parts

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The fraction, or percentage of total income which is consumed is called the:

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Average prospensity to consume

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If there is a decrease in disposable income in an economy, then:

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The APC rises and the APS Falls

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If disposable income is $900 billion when the average prosperity to consume is .09, it can be concluded that:

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saving is $90 billion

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Assume that an increase in a household's disposable income from 40,000 to 48,000 leads to an increase in consumption from 35,000 to 41,000, then the:

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Slope of the consumption schedule is .75

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If Matt's disposable income increases from 4,000 to 4,500 and his levels of saving increases from $200 to $325, it may be concluded that his marginal propensity to:

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consume is .75

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If the consumption schedule is a straight line, it can be concluded that the :

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MPC is constant at various levels of income

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If disposable income increases from 912 to 927 billion and MPC= 0.6, then consumption will increase by:

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$9 billion

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If disposable income decreases from 1800 to 1500 and MPC=0.75, then saving will:

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decrease by $75

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If the slope of linear consumption schedule increases in a private closed economy, then it can be concluded that the:

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MPC has increased

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The relationship between the MPS and the MPC is such that:

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1- MPC=MPS

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The saving schedule shows the relationship of saving of households to the level of:

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Disposable income

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Dissaving occurs when:

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Income is less than consumption

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The break even income would be level

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The fraction,or percentage of total income which is saved is called the

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Average propensity to save

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If the slope of consumption schedule is 0.75, then the slope of the saving schedule is

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0.25

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In an economy , for every $10 million increase in disposable income, saving increases by $2 million. It can be concluded that the

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Slope of the consumption schedule is .8

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

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Marginal propensity to save is positive

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In a private closed economy, national income is$4.5 trillion and savings equals $6.4 billion. Based on this data, the marginal propensity to consume

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cannot be calculated from the data given

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At the $300 level of disposable income

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There is a dissaving of $10

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The marginal propensity to consume is

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.60

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if disposable income is $550, we would expect the consumption to be

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$46

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At $320 billion level of disposable income, the average propensity to save is

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.075

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If consumption increases by $10 billion at each level of disposable income, the marginal propensity to consume will:

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not change, but the average propensity to consume will change.

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The ratio LM/PL would be a measure of the

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Marginal propensity to consume

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The marginal propensity to consuke is represented by

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GE/AB

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

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will shift upward.

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An increase in household wealth that creates a wealth effect would shift the

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consumption schedule upward and the saving schedule downward.

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Which of the following would shift the saving schedule upward?

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A decrease in wealth.

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The saving schedule would be shifted upward by

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A decrease in taxes

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As the consumption and saving schedules relate to real GDP, an increase in taxes will shift

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Downward both the consumption and saving schedules

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A lower real interest rate typically induces consumers to

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purchase more goods that are brought using credit

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A change in the amount saved due to the change in income is represented by a

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movement along the saving schedule

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line A2 shifts to A3 because of the so called wealth effect, then in figure (B) line

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B2 will shift to B1

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Consumption shifts from A2 to Aa3 because of a change in taxes, then in figure (B) line:

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B1 will shift to B3

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The Great Recession of 2007-2009 altered the prior behavior of consumers in the economy by

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shifting the consumption schedule down

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The Paradox of Thrift highlights the idea that

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Saving more can be bad for the economy during a recession

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Given the expected rate of return on all possible investment opportunities in the economy, a

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decrease in the real rate of interest will tend to increase the level of investment.

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If the real interest rate increases

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There will be a movement upward along the investment demand curve.

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A firm invest in a new machine that cost 2,000......an increase in total revenue of 2,200 a year.... The current real rate is 7 percent the firm should:

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Undertake the investment because the expected rate of return of 10 percent is greater than real rate of interest.

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According to the cumulative investment table `

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$40 billion worth of investments have expected rates of return 20% and 22%

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If the real rate falls from 20% to 16% then

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$30 billion of additional investments will be undertaken

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The investment demand curve is drawn with the amount of investment on the

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horizontal axis and the expected rate of return and interest rate on the vertical axis

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