question

the level of income.

answer

The most important determinant of consumer spending is:

question

level of income.

answer

The most important determinant of consumption and saving is the:

question

consume is three-fifths.

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:

question

1.0 minus .4.

answer

With an MPS of .4, the MPC will be:

question

change in income that is spent.

answer

The MPC can be defined as that fraction of a:

question

all the points at which consumption and income are equal.

answer

The 45-degree line on a graph relating consumption and income shows:

question

APC falls.

answer

As disposable income goes up the:

question

the amounts households intend to consume at various possible levels of aggregate income.

answer

The consumption schedule shows:

question

consumption to the level of disposable income.

answer

The consumption schedule directly relates:

question

decreases consumption by moving downward along a specific consumption schedule.

answer

A decline in disposable income:

question

consumption/income.

answer

The APC is calculated as:

question

a direct relationship between aggregate consumption and aggregate income.

answer

The consumption schedule shows:

question

specific level of total income that is consumed.

answer

The APC can be defined as the fraction of a:

question

increase absolutely, but decline as a percentage of income.

answer

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

question

APC + APS = 1.

answer

Which of the following is correct?

question

the MPC is constant and the APC declines as income rises.

answer

The consumption schedule is such that:

question

MPC is greater than zero, but less than one.

answer

The consumption and saving schedules reveal that the:

question

greater than zero, but less than one.

answer

The size of the MPC is assumed to be:

question

and saving both increase.

answer

As disposable income increases, consumption:

question

a direct and relatively stable relationship exists between consumption and income.

answer

The relationship between consumption and disposable income is such that:

question

consumption and saving cannot be determined from the information given.

answer

If the MPC is .8 and disposable income is $200, then:

question

the slope of the consumption schedule or line.

answer

The MPC for an economy is:

question

relatively stable.

answer

In contrast to investment, consumption is:

question

90.

answer

(Advanced analysis) Answer the question on the basis of the following consumption schedule: C = 20 + .9Y, where C is consumption and Y is disposable income. Refer to the above data. The MPC is:

question

$60.

answer

(Advanced analysis) Answer the question on the basis of the following consumption schedule: C = 20 + .9Y, where C is consumption and Y is disposable income. Refer to the above data. At an $800 level of disposable income, the level of saving is:

question

a decrease in disposable income

answer

Which one of the following will cause a movement down along an economy's consumption schedule?

question

the APC is 1.00.

answer

At the point where the consumption schedule intersects the 45-degree line:

question

consumption spending will be $14,500.

answer

Tessa's break-even income is $10,000 and her MPC is 0.75. If her actual disposable income is $16,000, her level of:

question

spend eight-tenths of any increase in his disposable income.

answer

If Trent's MPC is .80, this means that he will:

question

APC is greater than 1.

answer

Suppose a family's consumption exceeds its disposable income. This means that its

question

$100.

answer

(Advanced analysis) If the equation for the consumption schedule is C = 20 + 0.8Y, where C is consumption and Y is disposable income, then the average propensity to consume is 1 when disposable income is:

question

households will consume $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive.

answer

(Advanced analysis) The equation C = 35 + .75Y, where C is consumption and Y is disposable income, shows that:

question

the vertical intercept would be + 20 and the slope would be + .6.

answer

(Advanced analysis) If the equation C = 20 + .6Y, where C is consumption and Y is disposable income, were graphed:

question

multiplying total income by the APC.

answer

One can determine the amount of any level of total income that is consumed by:

question

MPC + MPS = APC + APS

answer

Which of the following is correct?

question

that households are spending more than their current incomes.

answer

Dissaving means:

question

consumption exceeds income.

answer

Dissaving occurs where:

question

MPS = MPC + 1

answer

Which of the following relations is not correct?

question

saving will increase absolutely and as a percentage of income.

answer

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

question

saving is zero.

answer

At the point where the consumption schedule intersects the 45-degree line:

question

increases, but by a smaller amount.

answer

The saving schedule is such that as aggregate income increases by a certain amount saving:

question

saving schedule will also be linear.

answer

If the consumption schedule is linear, then the:

question

plotting the vertical differences between the consumption schedule and the 45-degree line.

answer

Given the consumption schedule, it is possible to graph the relevant saving schedule by:

question

.1.

answer

If the marginal propensity to consume is .9, then the marginal propensity to save must be:

question

smaller is the marginal propensity to save.

answer

The greater is the marginal propensity to consume, the:

question

MPS must be constant.

answer

If the saving schedule is a straight line, the:

question

an increase in disposable income

answer

Which one of the following will cause a movement up along an economy's saving schedule?

question

wealth effect.

answer

In the late 1990s the U.S. stock market boomed, causing U.S. consumption to rise. Economists refer to this outcome as the:

question

shift of the consumption schedule.

answer

The wealth effect is shown graphically as a:

question

wealth effect of an increase in stock market prices.

answer

Refer to the above graph. A shift of the consumption schedule from C1 to C2 might be caused by a:

question

increase in real GDP.

answer

Refer to the above graph. A movement from a to b along C1 might be caused by a:

question

reverse wealth effect, caused by a decrease in stock market prices.

answer

Refer to the above graph. A shift of the consumption schedule from C2 to C1 might be caused by a(an):

question

that the APC has decreased and the APS has increased at each GDP level.

answer

An upward shift of the saving schedule suggests:

question

the expectation of a future decline in the consumer price index

answer

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

question

will shift downward.

answer

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

question

a change in consumer incomes

answer

Which of the following will not cause the consumption schedule to shift?

question

both the consumption and saving schedules downward.

answer

When consumption and saving are graphed relative to real GDP, an increase in personal taxes will shift:

question

an upward shift of the saving schedule.

answer

If for some reason households become increasingly thrifty, we could show this by:

question

MPS has increased.

answer

Suppose the economy's saving schedule shifts from S1 to S2 as shown in the above diagram. We can say that its:

question

an increase in personal taxes.

answer

Assume the economy's consumption and saving schedules simultaneously shift downward. This must be the result of:

question

.80.

answer

disposable income: $200 225 250 275 300 Consumption: $205 225 245 265 285 Refer to the above data. The marginal propensity to consume is:

question

dissaving is $5.

answer

disposable income: $200 225 250 275 300 Consumption: $205 225 245 265 285 Refer to the above data. At the $200 level of disposable income:

question

$305

answer

disposable income: $200 225 250 275 300 Consumption: $205 225 245 265 285 Refer to the above data. If disposable income was $325, we would expect consumption to be:

question

CB/AB.

answer

Refer to the above diagram. The marginal propensity to consume is equal to:

question

CD.

answer

Refer to the above diagram. At income level F the volume of saving is:

question

an income of E.

answer

Refer to the above diagram. Consumption will be equal to income at:

question

at income level H.

answer

Refer to the above diagram. The economy is dissaving:

question

CD/EF.

answer

Refer to the above diagram. The marginal propensity to save is:

question

as income increases, consumption decreases as a percentage of income.

answer

The above figure suggests that:

question

saving would be minus $20 billion at the zero level of income.

answer

Refer to the above figure. If the relevant saving schedule were constructed:

question

0.80.

answer

Disposable income: $0 50 100 150 200 Saving: -$10 0 10 20 30 Refer to the above data. The marginal propensity to consume is:

question

.10.

answer

Disposable income: $0 50 100 150 200 Saving: -$10 0 10 20 30 Refer to the above data. At the $100 level of income, the average propensity to save is:

question

.20.

answer

Disposable income: $0 50 100 150 200 Saving: -$10 0 10 20 30 Refer to the above data. If plotted on a graph, the slope of the saving schedule would be:

question

consumer wealth rose rapidly because of a significant increase in stock market prices.

answer

The saving schedule shown in the above diagram would shift downward if, all else equal:

question

C = 40 + .6Yd

answer

Disposable income: $0 100 200 300 400 Consumption: $40 100 160 220 280 Which of the following equations correctly represents the above data?

question

S = -40 + .4Yd

answer

Which of the following equations represents the saving schedule implicit in the above data?

question

the real interest rate and investment.

answer

The investment demand curve portrays an inverse (negative) relationship between:

question

enable more investment projects to be undertaken profitably.

answer

The investment demand slopes downward and to the right because lower real interest rates:

question

move the economy downward along its existing investment demand curve.

answer

Other things equal, a decrease in the real interest rate will:

question

20 percent.

answer

Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return on this tool is:

question

15 percent.

answer

Assume a machine which has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300. The expected rate of return on this machine is:

question

purchase the machine because the expected rate of return exceeds the interest rate.

answer

Assume a machine which has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300. If the firm finds it can borrow funds at an interest rate of 10 percent the firm should:

question

investment demand schedule.

answer

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

question

an increase in the real rate of interest will reduce the level of investment.

answer

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

question

increase the amount of investment spending.

answer

A decline in the real interest rate will:

question

expected rate of return on capital goods and the real interest rate.

answer

The immediate determinants of investment spending are the:

question

there is an inverse relationship between the real rate of interest and the level of investment spending.

answer

The investment demand curve suggests:

question

r l 20% $10 15 20 10 30 5 40 0 50

answer

Assume there are no prospective investment projects (I) that will yield an expected rate of return (r) of 25 percent or more, but that 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:

question

$10.

answer

Assume there are no prospective investment projects (I) that will yield an expected rate of return (r) of 25 percent or more, but that 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. If the real interest rate is 15 percent in this economy, the aggregate amount of investment will be:

question

the level of investment spending might either increase or decrease.

answer

If business taxes are reduced and the real interest rate increases:

question

shift the investment-demand curve to the right.

answer

Other things equal, a 10 percent decrease in corporate income taxes will:

question

businesses becoming more optimistic about future business conditions.

answer

The investment demand curve will shift to the right as the result of:

question

$30 billion of investment will be undertaken.

answer

expected rate of return: 12% 10 8 6 4 2 Amount of investment with this rate of return or higher: $10 20 30 40 50 60 The above schedule indicates that if the real interest rate is 8 percent, then:

question

we will be uncertain as to the resulting change in investment.

answer

Other things equal, if the real interest rate falls and business taxes rise:

question

technological progress.

answer

The investment demand curve will shift to the right as a result of:

question

an increase in the excess production capacity available in industry.

answer

The investment demand curve will shift to the left as a result of:

question

r is greater than i.

answer

If the real interest rate in the economy is i and the expected rate of return from additional investment is r, then more investment will be forthcoming when:

question

businesses planning to increase their stock of inventories.

answer

A rightward shift of the investment demand curve might be caused by:

question

the percentage increase in purchasing power that the lender receives on a loan.

answer

The real interest rate is:

question

the interest rate.

answer

When we draw an investment demand curve we hold constant all of the following except:

question

12 percent.

answer

If the nominal interest rate is 18 percent and the real interest rate is 6 percent, the inflation rate is:

question

22 percent.

answer

If the inflation rate is 10 percent and the real interest rate is 12 percent, the nominal interest rate is:

question

high nominal interest rate.

answer

A high rate of inflation is likely to cause a:

question

r will fall as more investment is undertaken.

answer

If the real interest rate in the economy is i and the expected rate of return on additional investment is r, then other things equal:

question

investment will take place until i and r are equal.

answer

If the real interest rate in the economy is i and the expected rate of return on additional investment is r, then other things equal:

question

$30

answer

Answer the question on the basis of the following information for a private closed economy. Assume that for the entire business sector of the economy there is $0 worth of investment projects that will yield an expected rate of return of 25 percent or more. But there are $15 worth of investments that will yield an expected rate of return of 20-25 percent; another $15 with an expected rate of return of 15-20 percent; and similarly an additional $15 of investment projects in each successive rate of return range down to and including the 0-5 percent range. Refer to the above information. If the real interest rate is 15 percent, what amount of investment will be undertaken?

question

$60

answer

Answer the question on the basis of the following information for a private closed economy. Assume that for the entire business sector of the economy there is $0 worth of investment projects that will yield an expected rate of return of 25 percent or more. But there are $15 worth of investments that will yield an expected rate of return of 20-25 percent; another $15 with an expected rate of return of 15-20 percent; and similarly an additional $15 of investment projects in each successive rate of return range down to and including the 0-5 percent range. Refer to the above information.Refer to the above information. If the real interest rate is 5 percent, what amount of investment will be undertaken?

question

is also the investment demand curve.

answer

Answer the question on the basis of the following information for a private closed economy. Assume that for the entire business sector of the economy there is $0 worth of investment projects that will yield an expected rate of return of 25 percent or more. But there are $15 worth of investments that will yield an expected rate of return of 20-25 percent; another $15 with an expected rate of return of 15-20 percent; and similarly an additional $15 of investment projects in each successive rate of return range down to and including the 0-5 percent range. Refer to the above information. The expected rate of return curve:

question

more variable than real GDP.

answer

In annual percentage terms, investment spending in the United States is:

question

all of these contribute to the instability.

answer

Investment spending in the United States tends to be unstable because:

question

profits are highly variable.

answer

Investment spending in the United States tends to be unstable because:

question

durable; instability

answer

Capital goods, because their purchases can be postponed like ______ consumer goods, tend to contribute to ________ in investment spending.

question

an increase in investment can cause GDP to change by a larger amount.

answer

The multiplier effect means that:

question

1/MPS.

answer

The multiplier is:

question

change in GDP resulting from a change in spending.

answer

The multiplier is useful in determining the:

question

change in GDP/initial change in spending.

answer

The multiplier is defined as:

question

infinitely large.

answer

If 100 percent of any change in income is spent, the multiplier will be:

question

1/(1 - MPC).

answer

The multiplier can be calculated as:

question

reciprocal of the slope of the saving schedule.

answer

The size of the multiplier is equal to the:

question

3.

answer

If the MPS is only half as large as the MPC, the multiplier is:

question

increase by $10 billion.

answer

If the MPC is .70 and investment increases by $3 billion, the equilibrium GDP will:

question

larger the slope of the saving schedule.

answer

The numerical value of the multiplier will be smaller the:

question

magnifies initial changes in spending into larger changes in GDP.

answer

The practical significance of the multiplier is that it:

question

2.5.

answer

If the MPC is .6, the multiplier will be:

question

$6 billion.

answer

Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by:

question

investment, net exports, and government spending.

answer

The multiplier applies to:

question

a change in spending will change aggregate income by a larger amount.

answer

The multiplier effect indicates that:

question

5.

answer

If a $200 billion increase in investment spending creates $200 billion of new income in the first round of the multiplier process and $160 billion in the second round, the multiplier in the economy is:

question

2.

answer

If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round, the multiplier in the economy is:

question

$400 billion.

answer

If a $100 billion decrease in investment spending causes income to decline by $100 billion in the first round of the multiplier process and by $75 billion in the second round, income will eventually decline by:

question

$5000 billion.

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:

question

consumption by $80 billion.

answer

If the marginal propensity to save is 0.2 in an economy, a $20 billion rise in investment spending will increase:

question

(1/MPS) billion increase in GDP.

answer

A $1 billion increase in investment will cause a:

question

in addition to saving, households use some of any increase in income to buy imported goods and to pay additional taxes.

answer

The actual multiplier effect in the U.S. economy is less than the multiplier effect in the text examples because:

question

the investment demand curve shifted inward.

answer

(Consider This) During the Great Recession of 2007-2009, both real interest rates and investment spending declined. This suggests that:

question

real interest rates and investment spending both declined.

answer

(Consider This) During the Great Recession of 2007-2009:

question

the multiplier.

answer

(Last Word) Art Buchwald's article "Squaring the Economic Circle" is a humorous description of:

question

a person's decision not to buy an automobile eventually reduces many people's incomes, including that of the person making the original decision.

answer

(Last Word) Art Buchwald's article "Squaring the Economic Circle" humorously describes how:

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