Question 1

The following table illustrates the multiplier process in a private closed economy:  Refer to the above table.The marginal propensity to save is:

Accepted Answer

A)  .5.
B)  .25.
C)  .2.
D)  .1.E) C) and D)
F) B) and D)

Question 2

The relationship between consumption and disposable income is such that:

Accepted Answer

A)  an inverse and stable relationship exists between consumption and income.
B)  a direct, but very volatile, relationship exists between consumption and income.
C)  a direct and quite stable relationship exists between consumption and income.
D)  the two are always equal.E) A) and D)
F) C) and D)

Question 3

As disposable income goes up the:

Accepted Answer

A)  APC falls.
B)  APS falls.
C)  volume of consumption declines absolutely.
D)  volume of investment can be expected to diminish.E) A) and B)
F) A) and C)

Question 4

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

Accepted Answer

A)  1
B)  .1.
C)  1.1.
D)  .9.E) B) and C)
F) All of the above

Question 5

Refer to the above diagram.At disposable income level D, consumption:

Accepted Answer

A)  is equal to CD.
B)  is equal to OD minus CD.
C)  is equal to CD/OD.
D)  is equal to CD plus BD.E) A) and B)
F) C) and D)

Question 6

Which of the following countries had the highest percentage of gross investment expenditure relative to GDP in 2014, as per Image 10.2 Global Perspective?

Accepted Answer

A)  China
B)  Korea
C)  Canada
D)  United StatesE) C) and D)
F) B) and D)

Question 7

The investment-demand curve will shift to the left:

Accepted Answer

A)  if firms plan to increase their inventories.
B)  if firms plan to decrease their inventories.
C)  if firms expect an increase in their sales.
D)  if firms expect no change in their sales.E) A) and C)
F) None of the above

Question 8

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

Accepted Answer

A)  BD.
B)  AB.
C)  CF - BF.
D)  DC.E) B) and C)
F) None of the above

Question 9

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:

Accepted Answer

A)  2
B)  3.33.
C)  5
D)  10E) B) and C)
F) None of the above

Question 10

The most important determinant of consumption and saving is the:

Accepted Answer

A)  level of bank credit.
B)  level of disposable income.
C)  interest rate.
D)  price level.E) None of the above
F) B) and C)

Question 11

1/2 percent. B) dissaving is $5. C) the average propensity to save is .20. D) the average propensity to consume is .80." class="answers-bank-image d-inline" rel="preload" > Refer to the above data.At the $200 level of disposable income:

Accepted Answer

A)  the marginal propensity to save is 21/2 percent.
B)  dissaving is $5.
C)  the average propensity to save is .20.
D)  the average propensity to consume is .80.E) C) and D)
F) B) and D)

Question 12

The numerical value of the multiplier will be smaller the:

Accepted Answer

A)  larger the average propensity to consume.
B)  larger the slope of the saving schedule.
C)  larger the slope of the consumption schedule.
D)  smaller the slope of the saving schedule.E) A) and B)
F) A) and C)

Question 13

Which of the following is the primary explanation for most of the fluctuations in output and employment over the course of the business cycle?

Accepted Answer

A)  changes in net exports
B)  changes in the marginal propensity to consume
C)  abrupt changes in stock market prices
D)  changes in investment expendituresE) None of the above
F) All of the above

Question 14

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

Accepted Answer

A)  investment-demand schedule.
B)  consumption of fixed capital schedule.
C)  saving schedule.
D)  aggregate supply curve.E) None of the above
F) All of the above

Question 15

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:

Accepted Answer

A)  $400 billion.
B)  $300 billion.
C)  $200 billion.
D)  $500 billion.E) A) and B)
F) A) and C)

Question 16

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

Accepted Answer

A)  an increase in the real rate of interest will reduce the level of investment.
B)  a decrease in the real rate of interest will reduce the level of investment.
C)  a change in the real interest rate will have no impact upon the level of investment.
D)  an increase in the real interest rate will increase the level of investment.E) C) and D)
F) None of the above

Question 17

Suppose an economy's consumption schedule shifts from C1to C2as shown in the diagram below.We can say that its: 1to C2as shown in the diagram below.We can say that its:   A) MPC has increased but its APC at each income level is unchanged. B) APC at each income level is increased but its MPC is unchanged. C) MPC and APC at each income level have both increased. D) MPC and APC at each income level have both decreased." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  MPC has increased but its APC at each income level is unchanged.
B)  APC at each income level is increased but its MPC is unchanged.
C)  MPC and APC at each income level have both increased.
D)  MPC and APC at each income level have both decreased.E) None of the above
F) B) and C)

Question 18

Refer to the above diagram.At disposable income level D, the average propensity to save is equal to:

Accepted Answer

A)  CD/BD.
B)  CD/0D.
C)  0D/CD.
D)  0A/0B.E) B) and C)
F) A) and D)

Question 19

The following table illustrates the multiplier process in a private closed economy:  Refer to the above table.The change in income in round two will be:

Accepted Answer

A)  $4
B)  $16
C)  $20
D)  $24E) B) and D)
F) All of the above

Question 20

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

Accepted Answer

A)  the availability of excess productive capacity.
B)  an increase in business taxes.
C)  businesses becoming more optimistic with respect to future business conditions.
D)  an increase in the real interest rate.E) A) and D)
F) All of the above

Exam 10: Part B: Basic Macroeconomic Relationships

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:

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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:

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

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The numerical value of the multiplier will be smaller the:

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Which of the following countries had the highest percentage of gross investment expenditure relative to GDP in 2014, as per Image 10.2 Global Perspective?

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The following table illustrates the multiplier process in a private closed economy: Refer to the above table.The change in income in round two will be:

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Which of the following is the primary explanation for most of the fluctuations in output and employment over the course of the business cycle?

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The most important determinant of consumption and saving is the:

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

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Refer to the above diagram.At disposable income level D, consumption:

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

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As disposable income goes up the:

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The following table illustrates the multiplier process in a private closed economy: Refer to the above table.The marginal propensity to save is:

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Refer to the above data.At the $200 level of disposable income:

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The investment-demand curve will shift to the left:

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The relationship between consumption and disposable income is such that:

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

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

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Refer to the above diagram.At disposable income level D, the average propensity to save is equal to:

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Suppose an economy's consumption schedule shifts from C1to C2as shown in the diagram below.We can say that its:

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Suppose an economy's consumption schedule shifts from C₁to C₂as shown in the diagram below.We can say that its:

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