question

Combined or Total

answer

To economists, the term "aggregate" means __________.

question

Positive

answer

Consumption and disposable income have what kind of relationship?

question

Nominal

answer

The real rate of interest is the ____________ rate of interest minus the rate of inflation.

question

Machinery Inventories New Plants Capital Equipment

answer

Which of the following are considered economic investment?

question

Average

answer

The fraction of total income that is saved equals the __________ propensity to save.

question

Money

answer

Interest is the financial cost of __________ capital to purchase real capital.

question

Income Output

answer

Which of the following two variables change by more than an initial change in spending?

question

Marginal

answer

The economic term for "extra" or "a change in" is:

question

Real; Nominal

answer

The _____________ interest rate is the percentage increase in purchasing power that the borrower pays the lender, while the ____________ interest rate is the percentage increase in money that the borrower pays the lender.

question

Fall

answer

When real interest rate ______________, households tend to borrow more, consume more, and save less.

question

Marginal Propensity to Save (MPS)

answer

The slope of the savings function is the

question

Average Propensity to Consume (APC)

answer

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

question

Investment

answer

________________ spending consists of expenditures on new plants, capital equipment, machinery, and inventories.

question

Spending

answer

A change in ________________ ultimately changes output and income by more than the initial change.

question

- Exhaust Disposable Income - Equal 1

answer

Because disposable income is either consumed or saved, the fraction of any disposable income consumed plus the fraction saved must:

question

Decreases

answer

Any factor that leads businesses to collectively expect lower rates of return on their investments ___________ investment demand.

question

Consumption

answer

Marginal propensity to consume is the slope of what function?

question

Interest rates Debt Wealth Expectations

answer

Which of the following non-income determinants of consumption explains a shift of the consumption schedule?

question

Marginal

answer

_______________ propensity to consume is the ratio of a change in consumption to a change in the income that caused that consumption.

question

Greater rates of return on their investments

answer

Increases in investment demand occur when businesses collectively expect:

question

Saving

answer

The marginal propensity to save is equal to a change in _____________ divided by a change in income.

question

Inflation

answer

Real interest rates are rates adjusted for what?

question

Direct

answer

The relationship between spending and GDP is?

question

Demand

answer

The investment _____________ curve cumulates every firm's estimated rates of return from all investment projects.

question

Investment

answer

_________________ expenditure is the most volatile component of total spending.

question

Interest rates Borrowing Wealth Disposable income Expectations

answer

Which of the following are determinants of household consumption and savings?

question

Not spending That part of disposable income not consumed

answer

Which of the following state how economists define the concept of personal saving?

question

Consumption schedule

answer

Wealth, debt, expectations and interest rates are non-income determinants that shift the:

question

Investment Government spending Net exports Consumption

answer

Changes to which of the following lead to the multiplier effect?

question

Expectations

answer

When households spend more and save less today based upon what they think might happen in the future, this is known as the economic impact of household ________________.

question

Real GDP

answer

A movement along a consumption schedule in the macroeconomic model represents a change in the amount consumed and is solely caused by a change in:

question

Increase

answer

A(n) ______________ in business taxes shifts the investment demand curve to the left.

question

Shifts to the right

answer

What happens to the investment demand curve when there is an increase in demand?

question

0.75

answer

Disposable income rises by $20 billion to $490 billion; households consume $15 billion of the increase and save $5 billion of that income. What is the marginal propensity to consume (MPC)?

question

Multiplier

answer

1/MPS is the formula for the spending ______________.

question

Multiplier

answer

Changes to investment, consumption, net exports and government purchases lead to the ____________ effect.

question

Changes in trade barriers Court decisions in key labor or antitrust cases Changes in exchange rates

answer

Which of the following may be reasons for substantial shifts in business expectations?

question

The Average Propensity to Consume (APC)

answer

Consumption divided by income equals

question

Acquisition, maintenance, and operating costs Business taxes Technological change Planned inventory changes Expectations Stock of capital goods on hand

answer

Which of the following shift the investment demand curve?

question

Investment

answer

Most of the fluctuations in output and employment over time are due to demand shocks relating to changes in ________________.

question

Benefit

answer

The marginal _____________ of investment is the expected rate of return.

question

Real GDP

answer

When developing macroeconomic models, economists change their focus from the relationship between consumption and disposable income to between consumption and:

question

Consumption spending

answer

______________ is relatively stable in comparison to investment spending.

question

Save

answer

Lower interest rates diminish the incentive to what?

question

Wealth

answer

A household's _____________ is the dollar amount of all the assets that it owns minus the dollar amount of its liabilities.

question

Increase; Decrease

answer

If households expect the price level to rise in the future, they will likely ___________ consumption and _____________ savings today.

question

Taxes Imports

answer

Spending on ____________ drains off some of the additional consumption created by the increases in income.

question

Inverse

answer

The ______________ relationship between interest rates and quantity of investment conforms to the law of demand.

question

Slightly downward

answer

At best, lower interest rates shift the consumption schedule slightly upward and the saving schedule:

question

The consumption schedule The saving schedule

answer

Due to long-term decisions and non-income determinants working in opposite directions, which of the following are relatively stable?

question

Investment

answer

A change in acquisition, maintenance and operating costs affect the ____________ demand curve by shifting it left or right depending on whether the costs go up or down.

question

Disposable income

answer

The consumption schedule shows the various amounts that households plan to consume at each level of:

question

Greater

answer

When making an investment, businesses will consider spending when the expected rate of return is _____________ than the interest rate.

question

An upward shift

answer

Borrowing affects consumption because, when a household borrows, it can increase current consumption beyond what would be possible if its spending were limited to its disposable income. What will result regarding the current consumption schedule?

question

Consumption

answer

Dissaving is when __________ is greater than disposable income.

question

Nominal

answer

When making an investment decision, the inflation rate should be subtracted from the _______________ interest rate to find the real rate of interest.

question

Average propensity to save (APS)

answer

Saving divided by income equals what?

question

Multiplier effect

answer

A business purchases a new piece of equipment. Another firm earns income from this sale with this income builds a new factory. The contractor that built the factory earns income and uses the income to take a vacation. The resort earns income from the contractor. This scenario describes the:

question

Using credit cards Borrowing from a bank Liquidating wealth

answer

Households can consume more than their current incomes by:

question

Future

answer

"No free lunch" means that while borrowing in the present allows for higher consumption in the present, it necessitates lower consumption in the ___________ when the debts that are incurred due to the borrowing must be repaid.

question

0.25

answer

If disposable income increases from $450 to $470 billion and savings increases from $15 to $20 billion, what is the marginal propensity to save (MPS)?

question

A decrease

answer

An increase in consumer purchases of automobiles and other goods bought on credit is likely to result after ____________ in the interest rate.

question

Low

answer

Dissaving will occur at relatively __________ disposable income levels.

question

Marginal-benefit, marginal-cost

answer

Investment decisions are what kind of decisions?

question

Disposable

answer

"Break-even income" is the income level at which consumption is equal to entire ___________ income.

question

More, more, less

answer

When real interest rates fall, households tend to borrow _______, consume _______ and save __________.

question

1/(1-MPC)

answer

The direct relationship between MPC and the multiplier is shown in the following equation:

question

Declining real estate values Falling stock market prices

answer

In 2008 a "reverse wealth effect" occurred due to:

question

Investment

answer

The interest cost, converted to percentage terms, needs to be weighed against the expected rate of return when making _________ decisions.

question

1

answer

The MPC plus the MPS equals:

question

Consumption

answer

Saving equals disposable income minus _________

question

3.00

answer

If the change in real GDP is $90 billion and the initial change in spending is $30 billion, the multiplier is:

question

Cost

answer

The marginal _______ of investment is the interest rate paid for borrowed funds.

question

Investment spending

answer

Innovations induce a large wave of ___________ that in time recedes.

question

Investment

answer

Expected profits and interest rates are the two basic determinants of ___________ spending.

question

Direct

answer

The consumption schedule reflects the __________ relationship between consumption and disposable income.

question

Spend almost all of it

answer

What do US households primarily do with their disposable income?

question

Slope

answer

The ratio of the vertical change to the horizontal change taking place by moving from one point to another along the line is called what?

question

Inventory

answer

Firms make planned changes in their __________ levels of anticipation of faster or slower sales.

question

MPC + MPS = 1

answer

Because the fraction of any change in income not consumed is, by definition, saved, which of the following equations is true?

question

An upward; downward

answer

The wealth effect occurs when events suddenly boost the value of existing wealth. This causes ________ shift in the consumption schedule and ___________ shift in the saving schedule.

question

Rate

answer

A business is thinking about investing in a new piece of equipment. The expected _________ of return helps the business make the decision about whether or not to invest.

question

Investment

answer

The variability of profits contributes to the volatility of ____________ spending.

question

Is not guaranteed and the investment involves risk

answer

The expected rate of return:

question

Durability

answer

Capital goods have indefinite lifespans because of their:

question

An increase or decrease in GDP

answer

What does the multiplier explain?

question

0.25

answer

The multiplier is 4 when the marginal propensity to save (MPS) is _______.

ECON 2010 CH 10 LearnSmart – Flashcards

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