Question 1

The slope of the scatter diagram representing the relationship between consumption and disposable income in the United States is approximately

Accepted Answer

A)   1.10.
B)   0.30
C)   0.50
D)   0.90E) None of the above
F) B) and C)

Question 2

The marginal propensity to consume (MPC) is calculated by which formula?

Accepted Answer

A)   MPC = change in DI divided by change in C
B)   MPC = change in GDP divided by change in DI
C)   MPC = change in C divided by change in DI
D)   MPC = change in C divided by change in GDPE) B) and C)
F) A) and B)

Question 3

Scatter diagrams are a useful way to depict the relationship between two variables.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following would be counted as investment in the national income accounts?

Accepted Answer

A)   the purchase of a newly issued stock
B)   the purchase of a newly built apartment house
C)   the purchase of a newly minted coin
D)   the payment of tuition at a private collegeE) None of the above
F) B) and C)

Question 5

In the circular flow model,which of the following is an injection?

Accepted Answer

A)   investment spending
B)   government taxes
C)   total exports
D)   importsE) A) and C)
F) B) and C)

Question 6

Aggregate demand is the total demand for

Accepted Answer

A)   all intermediate and final goods.
B)   all monetary investments.
C)   real and financial investments.
D)   all final goods and services.E) A) and B)
F) A) and D)

Question 7

Figure 8-2 
-In Figure 8-2,which of the following moves can be explained by a decrease in the price level?

Accepted Answer

A)   A to B
B)   A to C
C)   A to D
D)   A to EE) B) and D)
F) A) and D)

Question 8

The relationship between consumption and disposable income is such that as

Accepted Answer

A)   consumption rises,disposable income falls.
B)   disposable income rises,consumption rises.
C)   disposable income rises,consumption falls.
D)   disposable income rises,saving falls.E) All of the above
F) B) and D)

Question 9

Pat Robertson,a TV evangelist and former Republican Party candidate for president,once said that "debt is an affront to God," so good Christians should not spend beyond their incomes.Indeed,Robertson wants Christians to save more.If more Americans,Christians as well as others,took his message seriously,how would we represent the result using a Keynesian macroeconomic model?

Accepted Answer

A)   a downward movement along the consumption function
B)   an upward movement along the consumption function
C)   a downward shift of the consumption function
D)   an upward shift of the consumption functionE) B) and C)
F) A) and D)

Question 10

If the price level increases,we would expect consumers to

Accepted Answer

A)   raise their consumption functions.
B)   move downward along their consumption functions.
C)   lower their consumption functions.
D)   move upward along their consumption functions.E) A) and B)
F) B) and C)

Question 11

When aggregate demand decreases rapidly,the economy is likely to experience

Accepted Answer

A)   inflation.
B)   an economic boom.
C)   economic growth.
D)   recession.E) A) and D)
F) A) and C)

Question 12

Which of the following is a transfer payment?

Accepted Answer

A)   Work-study students receive wages transferred from the university budget.
B)   A company pays the moving expenses for a transferred employee.
C)   A student transfers to another college and receives a tuition rebate.
D)   A student receives a tuition grant from the federal government.E) None of the above
F) B) and C)

Question 13

Which of the following will most likely cause a shift in the consumption function?

Accepted Answer

A)   a change in consumer confidence
B)   a change in national output
C)   a change in real GDP
D)   a change in disposable incomeE) All of the above
F) A) and B)

Question 14

The value of both exports and imports are added to the value of national product.

Accepted Answer

A) True 
 B)False

Question 15

Residential construction (new houses and apartments) are included in which component of GDP?

Accepted Answer

A)   government purchases
B)   retail spending
C)   investment spending
D)   net exportsE) A) and C)
F) B) and C)

Question 16

Aggregate demand is defined as the total spending

Accepted Answer

A)   of all consumers,business firms,government agencies,and foreigners on final goods and services produced in the United States.
B)   by all consumers,business firms,government agencies,and foreigners in the United States.
C)   consumers,businesses,government agencies,and foreigners wish to make in one year.
D)   of consumers,businesses,and government agencies on final output.E) A) and D)
F) A) and C)

Question 17

Assume that consumption in the United States is $9,000 billion in 2009.If the MPC is 0.8 and disposable income increases by $1,000 billion in 2010,then the level of consumption in 2010 will be

Accepted Answer

A)   $10,000 billion.
B)   $9,800 billion.
C)   $9,000 billion.
D)   $7,200 billion.E) A) and B)
F) B) and D)

Question 18

Government spending is an injection in the sense that it

Accepted Answer

A)   increases the amount of total spending.
B)   increases the size of the federal deficit.
C)   decreases the amount of household saving.
D)   decreases the amount of taxes paid.E) A) and B)
F) A) and C)

Question 19

Households can finance their consumer spending from current

Accepted Answer

A)   income.
B)   wealth.
C)   debt.
D)   income and current wealth.E) A) and B)
F) A) and D)

Question 20

Suppose the stock market rises,causing a rapid increase in consumers' wealth.This would lead to

Accepted Answer

A)   a downward movement along the consumption function.
B)   a downward shift of the consumption function.
C)   an upward movement along the consumption function.
D)   an upward shift of the consumption function.E) B) and C)
F) A) and D)

Exam 8: Aggregate Demand and The Powerful Consumer

Households can finance their consumer spending from current

Correct Answer
verified

Suppose the stock market rises,causing a rapid increase in consumers' wealth.This would lead to

Correct Answer
verified

In the circular flow model,which of the following is an injection?

Correct Answer
verified

The relationship between consumption and disposable income is such that as

Correct Answer
verified

Correct Answer
verified

Which of the following would be counted as investment in the national income accounts?

Correct Answer
verified

Aggregate demand is defined as the total spending

Correct Answer
verified

Aggregate demand is the total demand for

Correct Answer
verified

Figure 8-2 -In Figure 8-2,which of the following moves can be explained by a decrease in the price level?

Correct Answer
verified

Government spending is an injection in the sense that it

Correct Answer
verified

Residential construction (new houses and apartments) are included in which component of GDP?

Correct Answer
verified

The value of both exports and imports are added to the value of national product.

Correct Answer
verified

If the price level increases,we would expect consumers to

Correct Answer
verified

The slope of the scatter diagram representing the relationship between consumption and disposable income in the United States is approximately

Correct Answer
verified

Which of the following is a transfer payment?

Correct Answer
verified

Scatter diagrams are a useful way to depict the relationship between two variables.

Correct Answer
verified

When aggregate demand decreases rapidly,the economy is likely to experience

Correct Answer
verified

The marginal propensity to consume (MPC) is calculated by which formula?

Correct Answer
verified

Assume that consumption in the United States is $9,000 billion in 2009.If the MPC is 0.8 and disposable income increases by $1,000 billion in 2010,then the level of consumption in 2010 will be

Correct Answer
verified

Which of the following will most likely cause a shift in the consumption function?

Correct Answer
verified

Exam 8: Aggregate Demand and The Powerful Consumer

Households can finance their consumer spending from current

Correct AnswerverifiedShow Answer

Suppose the stock market rises,causing a rapid increase in consumers' wealth.This would lead to

Correct AnswerverifiedShow Answer

In the circular flow model,which of the following is an injection?

Correct AnswerverifiedShow Answer

The relationship between consumption and disposable income is such that as

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following would be counted as investment in the national income accounts?

Correct AnswerverifiedShow Answer

Aggregate demand is defined as the total spending

Correct AnswerverifiedShow Answer

Aggregate demand is the total demand for

Correct AnswerverifiedShow Answer

Figure 8-2 -In Figure 8-2,which of the following moves can be explained by a decrease in the price level?

Correct AnswerverifiedShow Answer

Government spending is an injection in the sense that it

Correct AnswerverifiedShow Answer

Residential construction (new houses and apartments) are included in which component of GDP?

Correct AnswerverifiedShow Answer

The value of both exports and imports are added to the value of national product.

Correct AnswerverifiedShow Answer

If the price level increases,we would expect consumers to

Correct AnswerverifiedShow Answer

The slope of the scatter diagram representing the relationship between consumption and disposable income in the United States is approximately

Correct AnswerverifiedShow Answer

Which of the following is a transfer payment?

Correct AnswerverifiedShow Answer

Scatter diagrams are a useful way to depict the relationship between two variables.

Correct AnswerverifiedShow Answer

When aggregate demand decreases rapidly,the economy is likely to experience

Correct AnswerverifiedShow Answer

The marginal propensity to consume (MPC) is calculated by which formula?

Correct AnswerverifiedShow Answer

Assume that consumption in the United States is $9,000 billion in 2009.If the MPC is 0.8 and disposable income increases by $1,000 billion in 2010,then the level of consumption in 2010 will be

Correct AnswerverifiedShow Answer

Which of the following will most likely cause a shift in the consumption function?

Correct AnswerverifiedShow Answer

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