Question 1

If an increase of $5 billion in investment is associated with an increase of $25 billion in real Gross Domestic Product (GDP) ,the multiplier is

Accepted Answer

A)  1.
B)  3.
C)  5.
D)  7.

Question 2

Dissaving occurs when

Accepted Answer

A)  households deposit unusually large amounts of money into their savings account.
B)  households reduce their planned monthly saving.
C)  consumption spending exceeds real disposable income.
D)  the average saving rate for the nation unexpectedly falls.

Question 3

Which would increase real planned investment demand?

Accepted Answer

A)  a decrease in new technologies available
B)  a decline in profit expectations
C)  a decrease in business taxes
D)  an increase in nominal interest rates

Question 4

If saving equals $200 when real disposable income equals $1,000,the break-even income is

Accepted Answer

A)  less than $1,000.
B)  greater than $1,000.
C)  equal to $1,000.
D)  equal to $1,200.

Question 5

Suppose autonomous consumption is $1 trillion,investment spending is $1.5 trillion,and the marginal propensity to consume is 0.75.Show the graph for the C + I curve.What is the equilibrium level of real GDP? Explain its meaning.

Accepted Answer

In the below figure,the C curve has a ve...

Question 6

-Refer to the above figure.Which variable is autonomous with respect to real GDP?

Accepted Answer

A)  Real saving
B)  Real investment spending
C)  Real consumption spending
D)  The sum of real consumption and real saving

Question 7

-Refer to the above figure.At an income of $10,000,saving is

Accepted Answer

A)  0.
B)  $13,000.
C)  $3,000.
D)  -$3,000.

Question 8

-Refer to the above figure.Line ACE is called

Accepted Answer

A)  the saving function.
B)  the savings function.
C)  the 45-degree line.
D)  the consumption function.

Question 9

Spending by businesses on things such as machines and buildings which can be used to produce goods and services in the future is

Accepted Answer

A)  investment.
B)  consumption.
C)  consumption goods.
D)  savings.

Question 10

-Refer to the above table.The table gives the combinations of real disposable income and real consumption for a college student for a year.The break-even level of real disposable income is

Accepted Answer

A)  0
B)  6,000
C)  10,000
D)  14,000

Question 11

Which of the following is false?

Accepted Answer

A)  APC + MPS = 1
B)  MPC + MPS = 1
C)  1 - APC = APS
D)  APC + APS = 1

Question 12

-In the above figure,when real disposable income is less than 600,then

Accepted Answer

A)  consumption is less than disposable income.
B)  consumption is more than disposable income.
C)  consumption is the same as disposable income.
D)  the MPC will fall.

Question 13

The equation  is the

Accepted Answer

A)  average propensity to consume.
B)  average propensity to save.
C)  marginal propensity to consume.
D)  marginal propensity to save.

Question 14

The planned investment function shows that

Accepted Answer

A)  real gross investment falls as real NNP increases.
B)  a negative relationship exists between the level of planned investment and the interest rate.
C)  a positive relationship exists between planned consumption and planned investment.
D)  at higher levels of planned saving,planned investment increases.

Question 15

Average propensity to consume

Accepted Answer

A)  is the same as the break-even point.
B)  gives the amount a person changes planned consumption for a change in real disposable income.
C)  is the amount of consumption that is independent of the level of disposable income.
D)  is the proportion of total disposable income that is consumed.

Question 16

All of the following would cause the investment function relating investment to the interest rate to shift EXCEPT

Accepted Answer

A)  a change in the real interest rate.
B)  a change in producer expectations of future profit.
C)  a change in planned capital goods expenditure.
D)  a change in productive technology.

Question 17

Suppose when real disposable income is $5000,planned real consumption is $4000.When real disposable income increases to $6000,planned real saving increases by $500.The new planned real consumption expenditures is

Accepted Answer

A)  $5,000.
B)  $4,500.
C)  $6,000.
D)  $3,500.

Question 18

According to the permanet income hypothesis,a person's consumption increases only when

Accepted Answer

A)  the person's average lifetime income increases.
B)  the person saves more.
C)  the person's income increases unexpectedly.
D)  the person's current income increases.

Question 19

Assuming that  = $20,000 and C = $22,000,we would find that the average propensity to save equals

Accepted Answer

A)  0.9.
B)  1.1.
C)  -0.1.
D)  -0.8.

Question 20

Consumption goods

Accepted Answer

A)  include goods such as DVDs that firms hold in inventory.
B)  are only the goods bought by households for immediate satisfaction.
C)  include spending on machines and buildings so that goods can be produced in the future.
D)  are goods that are used to make other goods.

Exam 12: Consumption, real GDP, and the Multiplier

Suppose when real disposable income is $5000,planned real consumption is $4000.When real disposable income increases to $6000,planned real saving increases by $500.The new planned real consumption expenditures is

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Suppose autonomous consumption is $1 trillion,investment spending is $1.5 trillion,and the marginal propensity to consume is 0.75.Show the graph for the C + I curve.What is the equilibrium level of real GDP? Explain its meaning.

Correct AnswerverifiedIn the below figure,the C curve has a ve...View AnswerShow Answer

The planned investment function shows that

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-Refer to the above table.The table gives the combinations of real disposable income and real consumption for a college student for a year.The break-even level of real disposable income is

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If saving equals $200 when real disposable income equals $1,000,the break-even income is

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If an increase of $5 billion in investment is associated with an increase of $25 billion in real Gross Domestic Product (GDP) ,the multiplier is

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Which would increase real planned investment demand?

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Assuming that = $20,000 and C = $22,000,we would find that the average propensity to save equals

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-Refer to the above figure.Line ACE is called

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Average propensity to consume

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-In the above figure,when real disposable income is less than 600,then

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According to the permanet income hypothesis,a person's consumption increases only when

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Dissaving occurs when

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Which of the following is false?

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Consumption goods

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Spending by businesses on things such as machines and buildings which can be used to produce goods and services in the future is

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-Refer to the above figure.At an income of $10,000,saving is

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All of the following would cause the investment function relating investment to the interest rate to shift EXCEPT

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-Refer to the above figure.Which variable is autonomous with respect to real GDP?

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The equation is the

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In the below figure,the C curve has a ve...
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