Question 1

The size of the simple multiplier is equal to the:

Accepted Answer

A)  slope of the consumption schedule.
B)  reciprocal of the slope of the consumption schedule.
C)  slope of the saving schedule.
D)  reciprocal of the slope of the saving schedule.E) All of the above
F) B) and C)

Question 2

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

Accepted Answer

A)  an increase in disposable income.
B)  an increase in household wealth.
C)  the expectation of a recession.
D)  an increase in personal taxesE) A) and D)
F) B) and D)

Question 3

Suppose the consumption schedule is: 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:

Accepted Answer

A)  $180
B)  $740
C)  $60
D)  $18E) B) and C)
F) A) and D)

Question 4

A high rate of inflation is likely to cause a:

Accepted Answer

A)  high nominal interest rate.
B)  low nominal interest rate.
C)  low rate of growth of nominal GDP.
D)  decrease in nominal wages.E) A) and B)
F) A) and C)

Question 5

Following is consumption schedules for three private closed economies.DI signifies disposable income and C represents consumption expenditures.All figures are in billions of dollars.  Refer to the above data.Suppose that consumption increased by $2 billion at each level of DI in each of the three countries.We can conclude that the:

Accepted Answer

A)  marginal propensity to consume will remain unchanged in each of the three countries.
B)  marginal propensity to consume will decline in each of the three countries.
C)  average propensity to save will fall at each level of DI in each of the three countries.
D)  marginal propensity to save will rise in each of the three countries.E) A) and C)
F) None of the above

Question 6

The consumption schedule shows:

Accepted Answer

A)  that the MPC increases in proportion to GDP.
B)  that households consume more when interest rates are low.
C)  that consumption depends primarily upon the level of business investment.
D)  the amounts households plan or intend to consume at various possible levels of aggregate income.E) B) and D)
F) A) and B)

Question 7

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

Accepted Answer

A)  AE/0E.
B)  CB/AB.
C)  CF/CD.
D)  CD/CF.E) B) and C)
F) C) and D)

Question 8

Which of the following is correct?

Accepted Answer

A)  APC + APS = 1.
B)  APC + MPS = 1.
C)  APS + MPC = 1.
D)  APS + MPS = 1.E) B) and D)
F) A) and C)

Question 9

The simple multiplier is defined as:

Accepted Answer

A)  1 - MPS.
B)  change in GDP  ×	imes×  initial change in spending.
C)  change in GDP/initial change in spending.
D)  change in GDP - initial change in spending. E) None of the above
F) B) and D)

Question 10

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

Accepted Answer

A)  .5.
B)  .8.
C)  .75.
D)  .9.E) B) and C)
F) None of the above

Question 11

The multiplier is useful in determining the:

Accepted Answer

A)  full-employment unemployment rate.
B)  level of unintended investment or disinvestment.
C)  rate of inflation.
D)  change in equilibrium GDP resulting from a change in spending.E) A) and B)
F) A) and D)

Question 12

The multiplier is equal to the reciprocal of the MPC.

Accepted Answer

A) True 
 B)False

Question 13

The simple multiplier applies:

Accepted Answer

A)  only when an inflationary gap exists.
B)  to shifts in the consumption and investment schedules.
C)  only to shifts in the investment schedule.
D)  only to shifts in the consumption schedule.E) A) and D)
F) A) and C)

Question 14

Which of the following is likely to be an effect of excess capacity on the investment demand curve of an economy?

Accepted Answer

A)  A leftward shift of the curve
B)  A rightward shift of the curve
C)  An upward movement along the curve
D)  A downward movement along the curveE) B) and C)
F) All of the above

Question 15

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

Accepted Answer

A)  the MPC equals 1.
B)  the APC is zero.
C)  saving equals income.
D)  saving is zero.E) C) and D)
F) B) and C)

Question 16

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

Accepted Answer

A)  increases by the same amount as the increase in income.
B)  does not change.
C)  increases.
D)  decreases.E) B) and C)
F) A) and D)

Question 17

Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product.The multiplier for this economy:

Accepted Answer

A)  is 3.
B)  is 4.
C)  is 5.
D)  cannot be determined from the information given.E) A) and C)
F) All of the above

Question 18

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

Accepted Answer

A)  will not shift.
B)  may shift either upward or downward.
C)  will shift downward.
D)  will also shift upward.E) A) and D)
F) A) and C)

Question 19

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

Accepted Answer

A)  an increase in stock prices
B)  a decrease in stock prices
C)  an increase in consumer indebtedness
D)  a decrease in disposable incomeE) All of the above
F) B) and C)

Question 20

The slope of the consumption schedule is equal to the marginal propensity to consume.

Accepted Answer

A) True 
 B)False

Exam 10: Part B: Basic Macroeconomic Relationships

The simple multiplier is defined as:

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

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

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

Correct Answer
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Which of the following is likely to be an effect of excess capacity on the investment demand curve of an economy?

Correct Answer
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Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product.The multiplier for this economy:

Correct Answer
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The multiplier is equal to the reciprocal of the MPC.

Correct Answer
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The size of the simple multiplier is equal to the:

Correct Answer
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The consumption schedule shows:

Correct Answer
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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 consume is:

Correct Answer
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The simple multiplier applies:

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

Correct Answer
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Which of the following is correct?

Correct Answer
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The multiplier is useful in determining the:

Correct Answer
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A high rate of inflation is likely to cause a:

Correct Answer
verified

Suppose the consumption schedule is: 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:

Correct Answer
verified

The slope of the consumption schedule is equal to the marginal propensity to consume.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Exam 10: Part B: Basic Macroeconomic Relationships

The simple multiplier is defined as:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is likely to be an effect of excess capacity on the investment demand curve of an economy?

Correct AnswerverifiedShow Answer

Assume the consumption schedule for a private closed economy is C = 40 + 0.75Y, where C is consumption and Y is gross domestic product.The multiplier for this economy:

Correct AnswerverifiedShow Answer

The multiplier is equal to the reciprocal of the MPC.

Correct AnswerverifiedShow Answer

The size of the simple multiplier is equal to the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The consumption schedule shows:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The simple multiplier applies:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

The multiplier is useful in determining the:

Correct AnswerverifiedShow Answer

A high rate of inflation is likely to cause a:

Correct AnswerverifiedShow Answer

Suppose the consumption schedule is: 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:

Correct AnswerverifiedShow Answer

The slope of the consumption schedule is equal to the marginal propensity to consume.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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