QUESTION 1bb.docx
QUESTION 1
1. If Carol’s disposable incomeincreases from $1,000 to $1,600 and her level of saving increases from minus$100 to a plus $100, her marginal propensity to:
A.
consume is one-sixth.
B.
consume is one-half.
C.
consume is two-thirds.
D.
save istwo-thirds.
QUESTION 2
1. A decline in disposable income:
increases consumption by moving along aspecific consumption schedule.
decreases consumption because it shifts theconsumption schedule downward.
decreases consumption by moving along aspecific consumer schedule.
increases consumption because it shifts theconsumption schedule upward.
QUESTION 3
1. In contrast to investment,consumption is:
relatively unstable.
relatively stable.
measurable.
unmeasurable.
QUESTION 4
1. At the point where theconsumption schedule intersects the 45-degree line:
the APC is 1.00.
the MPC is 1.00.
saving is equal to consumption.
consumptionis less than income.
QUESTION 5
1. The MPC can be defined as thefraction of a:
change in income that is spent.
change in income that is saved.
given total income that is not consumed.
given total income that is consumed.
QUESTION 6
1. In the late 1990s the U.S.stock market boomed, causing U.S. consumption to rise. Economists refer to thisoutcome as the:
wealth effect.
multiplier effect.
interest-rate effect.
noneof the above.
QUESTION 7
1. Which of the following could shift bothconsumption and saving schedules upward?
adecrease in the personal income tax.
anincrease in the personal income tax.
adecrease in the real interest rate.
anincrease in stock market prices.
QUESTION 8
1.
A downward shift of the consumption schedulemight be caused by a(an):
increase in income.
wealth effect, caused by an increase instock market prices.
increase in real interest rate.
decrease in saving.
QUESTION 9
1. The investment demand slopesdownward and to the right because lower real interest rates:
expandconsumer borrowing, making investments more profitable.
enable more investment projects to beundertaken profitably.
result in fewer investment projects to beundertaken profitably.
create disincentives to invest.
QUESTION 10
1. The relationship between thereal interest rate and investment is shown by the:
investment demand curve.
investment schedule.
saving schedule.
consumption schedule.
QUESTION 11
1. When we draw an investmentdemand curve we hold constant all of the following except:
operatingand maintenance costs
business taxes.
the interest rate.
the present stock of capital goods.
QUESTION 12
1. Capital goods, because theirpurchases can be postponed like ______ consumer goods, tend to contribute to________ in investment spending.
durable; instability
nondurable; instability
nondurable; stability
durable; stability
QUESTION 13
1. If the slope of the consumptionschedule is 0.8, MPC must be :
0.2
0.3
0.8
1
QUESTION 14
1. With an MPS of .3, the MPC willbe:
.3
.7
1.3
noneof the above
QUESTION 15
1. The disposable income (DI) andconsumption (C) schedules are for a private, closed economy. All figures are inbillions of dollars. If plotted on a graph, the slope of the consumptionschedule would be:
.6
.9
.8
.7
QUESTION 16
1. If the MPC in an economy is 0.8and government expenditures increase by $5 billion, then GDPwill increase by:
$20 billion.
$25 billion.
$16 billion.
$4 billion.
QUESTION 17
1. In a private closed economy, saving andinvestment are, respectively:
aninjection and a leakage.
aleakage and an injection.
income and wealth.
none ofthe above.
QUESTION 18
1. The multiplier can becalculated by dividing:
The change in real GDP by the initial changein spending.
The initial change in spending by the changein real GDP.
One by one minus the marginal propensity tosave.
One by the marginal propensity to consume.
QUESTION 19
1. If a lump-sum tax of $40billion is levied at each level of income and the MPC is 0.75, then theconsumption schedule will shift:
upward by $30 billion.
upward by $10 billion.
downward by $10 billion.
downward by $30 billion.
QUESTION 20
1. If the marginal propensity toconsume in this economy is 0.8, a $10 increase in its net exports wouldincrease its real GDP by:
$50
$25
$75
$200
QUESTION 21
1. As disposable income decreases,consumption:
and saving both increase.
and saving both decrease.
increases and saving decreases.
decreases and saving increases
QUESTION 22
1. Refer to the consumptionschedule below. At income level 3, the amount of saving is represented by theline segment:
FG
FH
FD
GH
QUESTION 23
1. Refer to the consumption schedulebelow. At income level 1, the amount of saving is:
positive.
negative.
zero.
not measurable.
QUESTION 24
1. If consumers expect prices torise and shortages to occur in the future, then it will shift:
the consumption schedule upward and thesaving schedule downward.
downward both the consumption and savingschedules.
upward both the consumption and savingschedules.
the consumption schedule downward and thesaving schedule upward.
QUESTION 25
1. Planned investment is $30 billion at the $100 billion equilibriumlevel of output in a closed, private economy. Saving must be:
less than planned investment.
greaterthan planned investment.
equalto $100 billion.
equalto $30 billion.
QUESTION 26
1. Two basic determinants ofinvestment spending are:
consumer spending and government spending.
expected returns and real interest rate.
general price level and the level of output.
domestic trade and international trade.
QUESTION 27
1. The nominal rate of interest is 8.5 percent and the real rate is 5percent. The expected rate of return on an investment is 8 percent. The firmshould:
undertakethe investment because the expected rate of return of 8 percent is greaterthan the real rate of interest.
undertakethe investment because the expected rate of return of 8 percent is greaterthan the difference between the nominal and real interest rates.
notundertake the investment because the expected rate of return of 8 percent isless than the nominal plus the real interest rate.
notundertake the investment because the expected rate of return of 8 percent isless than the nominal interest rate.
QUESTION 28
1. Which of the following wouldshift the investment demand curve to the left?
Alower real interest rate.
Rising maintenance costs of investmentgoods.
Increasing business taxes.
BothB and C.
