Questions for Cahpter 27 – Flashcards
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If the MPC is .63, the multiplier is:
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1 / .37
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Along a particular saving schedule, each change in disposable income of $15 billion generates an additional $3 billion in saving. Therefore:
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the MPS is .2.
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The investment demand curve will shift to the left if:
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business taxes increase
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Suppose the MPC is ¾. If investment spending falls by $10 billion, the level of GDP will:
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fall by $40 billion
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If consumption and disposable income are equal at a particular level of income:
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saving must be zero at this point.
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All else equal, if the interest rate rises:
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planned investment spending will decrease
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If 100 percent of any change in income is spent, the multiplier will be:
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infinitely large
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(Advanced analysis) Answer the question on the basis of the following data:
Which of the following equations correctly represents the above data?
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C = 40 + .6Yd
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The most important determinant of consumer spending is:
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the level of income
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A decline in the real interest rate will shift the investment demand curve to the right.
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False
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Other things equal, a decrease in the real interest rate will:
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move the economy downward along its existing investment demand curve.
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The consumption schedule shows:
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the amounts households intend to consume at various possible levels of aggregate income.
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In annual percentage terms, investment spending in the United States is:
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more variable than real GDP.
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The MPC for an economy is:
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the slope of the consumption schedule or line
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Which of the following would shift the investment demand curve from ID1 to ID3?
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lower expected rates of return on investment
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Suppose the economy's saving schedule shifts from S1 to S2 as shown in the above diagram. We can say that its:
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MPS has increased
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As disposable income increases, consumption:
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and saving both increase
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The MPC can be defined as that fraction of a:
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change in income that is spent
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The saving schedule shown in the above diagram would shift downward if, all else equal:
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consumer wealth rose rapidly because of a significant increase in stock market prices.
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Refer to the above diagram. At disposable income level D, consumption is:
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equal to D minus CD
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If DI is $275 billion and the APC is 0.8, we can conclude that saving is $55 billion.
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True
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Refer to the above diagram. At income level F the volume of saving is:
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CD.
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Answer the question on the basis of the following consumption schedules. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars.
Refer to the above data. The marginal propensity to save:
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is highest in economy (1).
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The actual multiplier effect in the U.S. economy is less than the multiplier effect in the text examples because:
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in addition to saving, households use some of any increase in income to buy imported goods and to pay additional taxes.
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Investment is highly stable; it increases over time at a very steady rate.
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False
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(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:
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.90.
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