Question 1

2 to ID1? A)  Rising real interest rates B)  Increasing business taxes C)  Lower acquisition cost of capital goods D)  Higher expected rates of return on investment" class="answers-bank-image d-inline" rel="preload" > Refer to the graph above. Which of the following would shift the investment demand curve from ID2 to ID1?

Accepted Answer

A)   Rising real interest rates
B)   Increasing business taxes
C)   Lower acquisition cost of capital goods
D)   Higher expected rates of return on investmentE) B) and D)
F) A) and B)

Question 2

The slope of the consumption schedule between two points on the schedule is:

Accepted Answer

A)   The ratio of the change in consumption to the change in disposable income between those two points
B)   The ratio of the change in disposable income over the change in consumption between those two points
C)   Equivalent to one plus the marginal propensity to save
D)   Equivalent to the average propensity to consumeE) A) and B)
F) A) and C)

Question 3

2 to ID3? A)  A lower real interest rate B)  Rising maintenance costs of investment goods C)  Increasing business taxes D)  Falling stock of capital resources while output is high" class="answers-bank-image d-inline" rel="preload" > Refer to the graph above. Which of the following would shift the investment demand curve from ID2 to ID3?

Accepted Answer

A)   A lower real interest rate
B)   Rising maintenance costs of investment goods
C)   Increasing business taxes
D)   Falling stock of capital resources while output is highE) A) and B)
F) B) and C) D

Question 4

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

Accepted Answer

A)   MPC - MPS = 1
B)   MPS/MPC = 1
C)   1 - MPC = MPS
D)   MPC - 1 = MPSE) B) and D)
F) None of the above C

Question 5

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

Accepted Answer

A)   May shift either upward or downward
B)   Will shift downward
C)   Will shift upward
D)   Will not shiftE) None of the above
F) All of the above

Question 6

If consumers expect prices to rise and shortages to occur in the future, then there will be a shift:

Accepted Answer

A)   Upward of both the consumption and saving schedules
B)   Downward of both the consumption and saving schedules
C)   Of the consumption schedule upward and of the saving schedule downward
D)   Of the consumption schedule downward and the saving schedule upwardE) None of the above
F) B) and D)

Question 7

If a family's MPC is 0.7, it means that the family is:

Accepted Answer

A)   Operating at the break-even point
B)   Spending seven-tenths of any increment to its income
C)   Necessarily dissaving
D)   Spending 70 percent of its disposable incomeE) C) and D)
F) B) and C)

Question 8

The graph above shows the relationship between consumption and income. The ratio LM/PL would be a measure of the:

Accepted Answer

A)   Marginal propensity to consume
B)   Marginal propensity to save
C)   Average propensity to consume
D)   Average propensity to saveE) None of the above
F) A) and D) A

Question 9

A change in interest rates would shift the consumption schedule and the saving schedule ______; a change in taxes would shift these two schedules ______.

Accepted Answer

A)   In the same direction; also in the same direction
B)   In the same direction; in opposite directions
C)   In opposite directions; also in opposite directions
D)   In opposite directions; in the same directionE) A) and C)
F) None of the above

Question 10

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:

Accepted Answer

A)   Decreases as income increases
B)   Is greater than the marginal propensity to save
C)   Is less than the average propensity to consume
D)   Cannot be calculated from the data givenE) None of the above
F) All of the above

Question 11

If disposable income is $900 billion when the average propensity to consume is 0.9, it can be concluded that:

Accepted Answer

A)   The marginal propensity to consume is also 0.9
B)   The marginal propensity to save is 0.1
C)   Consumption is $900 billion
D)   Saving is $90 billionE) A) and C)
F) B) and D)

Question 12

The amount of consumption in an economy correlates:

Accepted Answer

A)   Inversely with the level of disposable income
B)   Directly with the level of disposable income
C)   Directly with the level of saving
D)   Directly with the rate of interestE) A) and D)
F) C) and D)

Question 13

In general, the steeper the consumption schedule the:

Accepted Answer

A)   Smaller is the marginal propensity to consume
B)   Greater is the marginal propensity to save
C)   Smaller is the multiplier
D)   Larger is the multiplierE) A) and B)
F) B) and D)

Question 14

The value of the multiplier is likely to fall if there is a fall in:

Accepted Answer

A)   Consumption
B)   Income
C)   Total spending
D)   The marginal propensity to consumeE) B) and C)
F) None of the above

Question 15

The marginal propensity to consume is the ratio of consumption to saving.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)   Vertical axis and disposable income on the horizontal axis
B)   Horizontal axis and disposable income on the vertical axis
C)   Horizontal axis and the expected rate of return and interest rate on the vertical axis
D)   Vertical axis and the expected rate of return and interest rate on the horizontal axisE) C) and D)
F) B) and C)

Question 17

The graph above shows the relationship between consumption and income. Which of the following statements is correct?

Accepted Answer

A)   The marginal propensity to consume in the economy shown is greater than 1
B)   The marginal propensity to consume varies across income levels
C)   The average propensity to consume at income level K is given by KM divided by KN
D)   The marginal propensity to consume can be calculated by dividing LM by 0KE) A) and B)
F) All of the above

Question 18

The disposable income (DI)  and consumption (C)  schedules are for a private, closed economy. All figures are in billions of dollars.  Refer to the data above. The marginal propensity to save in this economy is:

Accepted Answer

A)   .1
B)   .72
C)   .8
D)   .9E) All of the above
F) A) and C)

Question 19

If disposable income is $350 billion and the average propensity to consume is .80, then personal saving is $70 billion.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)   Average propensity to consume is greater than 1
B)   Average propensity to save is greater than 1
C)   Marginal propensity to save is negative
D)   Marginal propensity to save is positiveE) B) and C)
F) A) and B)

Exam 10: Basic Macroeconomic Relationships

Refer to the graph above. Which of the following would shift the investment demand curve from ID2 to ID1?

Correct AnswerverifiedShow Answer

The slope of the consumption schedule between two points on the schedule is:

Correct AnswerverifiedShow Answer

Refer to the graph above. Which of the following would shift the investment demand curve from ID2 to ID3?

Correct AnswerverifiedD

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

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

If consumers expect prices to rise and shortages to occur in the future, then there will be a shift:

Correct AnswerverifiedShow Answer

If a family's MPC is 0.7, it means that the family is:

Correct AnswerverifiedShow Answer

The graph above shows the relationship between consumption and income. The ratio LM/PL would be a measure of the:

Correct AnswerverifiedA

A change in interest rates would shift the consumption schedule and the saving schedule ______; a change in taxes would shift these two schedules ______.

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

If disposable income is $900 billion when the average propensity to consume is 0.9, it can be concluded that:

Correct AnswerverifiedShow Answer

The amount of consumption in an economy correlates:

Correct AnswerverifiedShow Answer

In general, the steeper the consumption schedule the:

Correct AnswerverifiedShow Answer

The value of the multiplier is likely to fall if there is a fall in:

Correct AnswerverifiedShow Answer

The marginal propensity to consume is the ratio of consumption to saving.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The graph above shows the relationship between consumption and income. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The disposable income (DI) and consumption (C) schedules are for a private, closed economy. All figures are in billions of dollars. Refer to the data above. The marginal propensity to save in this economy is:

Correct AnswerverifiedShow Answer

If disposable income is $350 billion and the average propensity to consume is .80, then personal saving is $70 billion.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the graph above. Which of the following would shift the investment demand curve from ID₂ to ID₁?

Correct Answer
verified

Correct Answer
verified

Refer to the graph above. Which of the following would shift the investment demand curve from ID₂ to ID₃?

Correct Answer
verified
D

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

A change in interest rates would shift the consumption schedule and the saving schedule ; a change in taxes would shift these two schedules .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified