Question 1

In Keynesian analysis,if investment remains constant when income changes,the investment is called

Accepted Answer

A)  planned.
B)  autonomous.
C)  unplanned.
D)  discretionary.

Question 2

If disposable income = $200 billion and the APS = 0.9,then

Accepted Answer

A)  saving = $90 billion.
B)  saving = $45 billion.
C)  saving = $180 billion.
D)  saving cannot be determined.

Question 3

Suppose the marginal propensity to consume is 0.75.What does this mean? What do we know about the marginal propensity to save? What do we know about the average propensity to consume?

Accepted Answer

A marginal propensity to consume of 0.75...

Question 4

The relationship between households' planned consumption expenditures and households' level of disposable real income is called

Accepted Answer

A)  the consumption function.
B)  the savings function.
C)  the investment function.
D)  the household aggregate demand function.

Question 5

The part of consumption that is independent of disposable income is called

Accepted Answer

A)  automatic consumption.
B)  fixed consumption.
C)  personal consumption.
D)  autonomous consumption.

Question 6

If real Gross Domestic Product (GDP) is above its equilibrium level,

Accepted Answer

A)  firms are not maximizing their profits.
B)  planned investment is greater than planned saving.
C)  firms accumulate unplanned inventories.
D)  planned consumption is less than actual consumption.

Question 7

If the aggregate supply curve is upward sloping,then an increase in autonomous consumption leads to a(n)

Accepted Answer

A)  increase in aggregate demand and a rise in the price level.
B)  decrease in aggregate demand and a rise in the price level.
C)  decrease in aggregate demand and a fall in the price level.
D)  no change in aggregate demand and no change in the price level.

Question 8

Suppose the economy is at an equilibrium when C + I + G + X = $12 trillion.If the economy is currently at a real national income level of $14 trillion,then total planned real expenditures

Accepted Answer

A)  exceed real Gross Domestic Product (GDP) ,and real Gross Domestic Product (GDP) will increase.
B)  are less than real Gross Domestic Product (GDP) ,and real Gross Domestic Product (GDP) will decline.
C)  are equal to real Gross Domestic Product (GDP) ,and there will be no change in real Gross Domestic Product (GDP) .
D)  are less than real Gross Domestic Product (GDP) ,and real Gross Domestic Product (GDP) will increase.

Question 9

A decrease in interest rates will

Accepted Answer

A)  shift the investment function relating planned investment to the interest rate to the right.
B)  shift the investment function relating planned investment to the interest rate to the left.
C)  be a movement along the investment function relating planned investment to the interest rate.
D)  have no impact on the investment function relating planned investment to the interest rate.

Question 10

Suppose real disposable income increases by $1,000.Given this information,we know that

Accepted Answer

A)  consumption will generally increase by exactly $1,000.
B)  consumption will generally increase by less than $1,000.
C)  consumption will generally increase by more than $1,000.
D)  saving will generally increase by exactly $1,000.

Question 11

-Refer to the above figure.The point at which saving equals zero is

Accepted Answer

A)  only at point A.
B)  to the left of point B.
C)  only at point B.
D)  to the right of point B.

Question 12

When real Gross Domestic Product (GDP) exceeds total planned real expenditures,

Accepted Answer

A)  there will be unplanned decreases in inventories.
B)  the circular flow will increase.
C)  a lower level of equilibrium real Gross Domestic Product (GDP) will result.
D)  a higher level of equilibrium real Gross Domestic Product (GDP) will prevail.

Question 13

Which of the following is true?

Accepted Answer

A)  MPC - MPS = 1
B)  MPC + MPS = 1
C)  MPC * MPS = 1
D)  MPC / MPS = 1

Question 14

Autonomous consumption is defined as

Accepted Answer

A)  the level of real consumption spending that is independent of real disposable income.
B)  the real consumption spending by the autonomous government.
C)  the level of real consumption spending that is equal to real disposable income.
D)  the consumption of foreign-made goods independent of exchange rates.

Question 15

-Use the above table.We can infer from the table that when real disposable income is $175,

Accepted Answer

A)  APC = 0.91.
B)  APC = 0.80.
C)  APC = 0.20.
D)  APC = 0.09.

Question 16

The marginal propensity to consume (MPC)

Accepted Answer

A)  shows how much real disposable income changes when consumption falls.
B)  is greater than 1 only if the marginal propensity to save is greater than 1.
C)  shows how much of an extra dollar of real disposable income is spent.
D)  shows the percentage of real disposable income consumed at each level of income.

Question 17

-In the above figure,saving will equal zero when real disposable income equals

Accepted Answer

A)  0.
B)  60.
C)  600.
D)  500.

Question 18

If that the marginal propensity to save (MPS) increased from 0.20 to 0.25,this would cause the multiplier effect to

Accepted Answer

A)  decrease.
B)  increase.
C)  stay the same.
D)  None of the above is correct.

Question 19

In the Keynesian model,planned investment is inversely related to

Accepted Answer

A)  the interest rate.
B)  the level of income.
C)  the wage rate.
D)  the tax rate.

Question 20

When the SRAS curve slopes upward,the actual affect of an increase in real autonomous spending on equilibrium real GDP is smaller than predicted by the multiplier because

Accepted Answer

A)  the price level falls.
B)  the price level rises
C)  real GDP increases.
D)  real GDP decreases.

Exam 12: Consumption, real GDP, and the Multiplier

Suppose the marginal propensity to consume is 0.75.What does this mean? What do we know about the marginal propensity to save? What do we know about the average propensity to consume?

Correct AnswerverifiedA marginal propensity to consume of 0.75...View AnswerShow Answer

-In the above figure,saving will equal zero when real disposable income equals

Correct AnswerverifiedShow Answer

Autonomous consumption is defined as

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If the aggregate supply curve is upward sloping,then an increase in autonomous consumption leads to a(n)

Correct AnswerverifiedShow Answer

If real Gross Domestic Product (GDP) is above its equilibrium level,

Correct AnswerverifiedShow Answer

If disposable income = $200 billion and the APS = 0.9,then

Correct AnswerverifiedShow Answer

If that the marginal propensity to save (MPS) increased from 0.20 to 0.25,this would cause the multiplier effect to

Correct AnswerverifiedShow Answer

-Use the above table.We can infer from the table that when real disposable income is $175,

Correct AnswerverifiedShow Answer

When real Gross Domestic Product (GDP) exceeds total planned real expenditures,

Correct AnswerverifiedShow Answer

A decrease in interest rates will

Correct AnswerverifiedShow Answer

The part of consumption that is independent of disposable income is called

Correct AnswerverifiedShow Answer

-Refer to the above figure.The point at which saving equals zero is

Correct AnswerverifiedShow Answer

The marginal propensity to consume (MPC)

Correct AnswerverifiedShow Answer

When the SRAS curve slopes upward,the actual affect of an increase in real autonomous spending on equilibrium real GDP is smaller than predicted by the multiplier because

Correct AnswerverifiedShow Answer

In the Keynesian model,planned investment is inversely related to

Correct AnswerverifiedShow Answer

In Keynesian analysis,if investment remains constant when income changes,the investment is called

Correct AnswerverifiedShow Answer

The relationship between households' planned consumption expenditures and households' level of disposable real income is called

Correct AnswerverifiedShow Answer

Suppose real disposable income increases by $1,000.Given this information,we know that

Correct AnswerverifiedShow Answer

Which of the following is true?

Correct AnswerverifiedShow Answer

Suppose the economy is at an equilibrium when C + I + G + X = $12 trillion.If the economy is currently at a real national income level of $14 trillion,then total planned real expenditures

Correct AnswerverifiedShow Answer

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A marginal propensity to consume of 0.75...
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