Question 1

Economists have proved that a substantial increase in income during a month does not affect consumption much in the short run unless it is perceived as a permanent increase.

Accepted Answer

A) True 
 B)False

Question 2

In the table given below Y represents the aggregate expenditure of the economy on C = consumption, I = investment, G = government projects, and X = net exports.?
 
-Refer to Table 9.3. At an income level of $300, the average propensity to save equals:

Accepted Answer

A)   0.10.
B)   0.23.
C)   0.33.
D)   0.67.
E)   1.50.F) All of the above
G) B) and D)

Question 3

The figure given below represents the saving function of an economy.?Figure 9.1
 
-Refer to Figure 9.1. At the real GDP level of $400 billion, which of the following statements is true?

Accepted Answer

A)   There is dissaving.
B)   Saving is equal to $10 billion.
C)   Consumption is equal to disposable income.
D)   The slope of the saving function is equal to zero.
E)   The slope of the consumption function is equal to zero.F) B) and E)
G) B) and D)

Question 4

Dissaving occurs when:

Accepted Answer

A)   disposable income is greater than consumption.
B)   consumption is greater than disposable income.
C)   consumption is equal to disposable income.
D)   consumption is greater than personal income.
E)   consumption is less than personal income.F) B) and D)
G) A) and D)

Question 5

Dissaving occurs when the consumption function lies below the 45-degree line.

Accepted Answer

A) True 
 B)False

Question 6

Other things equal, when the U.S. dollar depreciates, domestic exports rise at every level of domestic income.

Accepted Answer

A) True 
 B)False

Question 7

Saving remaining constant, the average propensity to save declines with an increase in disposable income.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is least likely to contribute to the volatility of investment spending?

Accepted Answer

A)   Expectations about business conditions
B)   Changes in government spending
C)   Changes in tax laws
D)   Changes in capacity utilization
E)   Interest rate fluctuationsF) A) and D)
G) A) and C)

Question 9

In the table given below Y represents the aggregate expenditure of the economy on C = consumption, I = investment, G = government projects, and X = net exports.?
 
-Refer to Table 9.3. Calculate the marginal propensity to consume in the economy.

Accepted Answer

A)   0.25
B)   0.50
C)   0.75
D)   0.80
E)   1.25F) All of the above
G) None of the above

Question 10

The average propensity to save (APS) is the proportion of disposable income that is saved.

Accepted Answer

A) True 
 B)False

Question 11

The consumer confidence index can be defined as:

Accepted Answer

A)   an economic index that measures how consumers feel about their government.
B)   an economic index that measures how confident companies are about keeping their current consumers.
C)   an economic index that measures household expectations about the economy.
D)   an economic index that measures how investors feel about their investments in the stock market.
E)   an economic index used to measure consumers' confidence on a particular brand.F) B) and E)
G) A) and B)

Question 12

The sum of the MPC and the MPS is always:

Accepted Answer

A)   greater than 1.
B)   less than 1.
C)   equal to 1.
D)   equal to zero.
E)   between 0 and 1.F) A) and B)
G) A) and C)

Question 13

Investment is considered to be negatively correlated with current real GDP.

Accepted Answer

A) True 
 B)False

Question 14

-Refer to Table 9.2. If a firm purchases the machine by taking out a one-year loan, how much interest will the firm have to pay?

Accepted Answer

A)   $301,500
B)   $30,150
C)   $270,000
D)   $27,000
E)   $9,000F) D) and E)
G) A) and D)

Question 15

All of the following would cause exports to decline, except:

Accepted Answer

A)   a depreciation of the domestic currency.
B)   a decline in foreign income.
C)   stricter government regulations on international trade.
D)   a decline in foreign preferences for domestic goods.
E)   foreign import quotas on domestic products.F) B) and C)
G) A) and E)

Question 16

The consumption function becomes flatter if:

Accepted Answer

A)   the average propensity to spend increases.
B)   the marginal propensity to spend increases.
C)   the marginal propensity to save increases.
D)   the autonomous consumption increases.
E)   the autonomous consumption decreases.F) A) and D)
G) B) and C)

Question 17

The United States introduced investment tax credit in 1962 and has continued to offer it till date. This has reduced the volatility of investments in the country.

Accepted Answer

A) True 
 B)False

Question 18

Any increase in autonomous consumption is associated with:

Accepted Answer

A)   an equivalent increase in autonomous saving.
B)   an equivalent decrease in autonomous saving.
C)   an equivalent increase in the slope of the saving function.
D)   an equivalent decrease in the slope of the consumption function.
E)   an equivalent movement along the consumption function.F) B) and D)
G) None of the above

Question 19

In the country of Marzipana, total consumption in Year 1 was $56,000 million and in Year 2 was $60,000 million. It has been observed that each time disposable income changes in this country by $100, consumption changes by $70. Using this information compute the change in disposable income from Year 1 to Year 2.

Accepted Answer

A)   Disposable income increased by $2,800 million in Year 2.
B)   Disposable income decreased by $2,000 million in Year 2.
C)   Disposable income increased by $2,000 million in Year 2.
D)   Disposable income increased by $4,500 million in Year 2.
E)   Disposable income decreased by $2,600 million in Year 2.F) B) and D)
G) A) and E)

Question 20

According to the permanent income hypothesis, when income rises above the permanent income level, the household saves at a lower rate than the long-run MPS.

Accepted Answer

A) True 
 B)False

Exam 9: Aggregate Expenditures

The figure given below represents the saving function of an economy.?Figure 9.1 -Refer to Figure 9.1. At the real GDP level of $400 billion, which of the following statements is true?

Correct Answer
verified

The sum of the MPC and the MPS is always:

Correct Answer
verified

All of the following would cause exports to decline, except:

Correct Answer
verified

Saving remaining constant, the average propensity to save declines with an increase in disposable income.

Correct Answer
verified

Any increase in autonomous consumption is associated with:

Correct Answer
verified

The consumption function becomes flatter if:

Correct Answer
verified

Investment is considered to be negatively correlated with current real GDP.

Correct Answer
verified

According to the permanent income hypothesis, when income rises above the permanent income level, the household saves at a lower rate than the long-run MPS.

Correct Answer
verified

Which of the following is least likely to contribute to the volatility of investment spending?

Correct Answer
verified

The consumer confidence index can be defined as:

Correct Answer
verified

In the table given below Y represents the aggregate expenditure of the economy on C = consumption, I = investment, G = government projects, and X = net exports.? -Refer to Table 9.3. At an income level of $300, the average propensity to save equals:

Correct Answer
verified

Dissaving occurs when the consumption function lies below the 45-degree line.

Correct Answer
verified

Economists have proved that a substantial increase in income during a month does not affect consumption much in the short run unless it is perceived as a permanent increase.

Correct Answer
verified

The average propensity to save (APS) is the proportion of disposable income that is saved.

Correct Answer
verified

In the table given below Y represents the aggregate expenditure of the economy on C = consumption, I = investment, G = government projects, and X = net exports.? -Refer to Table 9.3. Calculate the marginal propensity to consume in the economy.

Correct Answer
verified

Correct Answer
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Dissaving occurs when:

Correct Answer
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-Refer to Table 9.2. If a firm purchases the machine by taking out a one-year loan, how much interest will the firm have to pay?

Correct Answer
verified

The United States introduced investment tax credit in 1962 and has continued to offer it till date. This has reduced the volatility of investments in the country.

Correct Answer
verified

Other things equal, when the U.S. dollar depreciates, domestic exports rise at every level of domestic income.

Correct Answer
verified

Exam 9: Aggregate Expenditures

The figure given below represents the saving function of an economy.?Figure 9.1 -Refer to Figure 9.1. At the real GDP level of $400 billion, which of the following statements is true?

Correct AnswerverifiedShow Answer

The sum of the MPC and the MPS is always:

Correct AnswerverifiedShow Answer

All of the following would cause exports to decline, except:

Correct AnswerverifiedShow Answer

Saving remaining constant, the average propensity to save declines with an increase in disposable income.

Correct AnswerverifiedShow Answer

Any increase in autonomous consumption is associated with:

Correct AnswerverifiedShow Answer

The consumption function becomes flatter if:

Correct AnswerverifiedShow Answer

Investment is considered to be negatively correlated with current real GDP.

Correct AnswerverifiedShow Answer

According to the permanent income hypothesis, when income rises above the permanent income level, the household saves at a lower rate than the long-run MPS.

Correct AnswerverifiedShow Answer

Which of the following is least likely to contribute to the volatility of investment spending?

Correct AnswerverifiedShow Answer

The consumer confidence index can be defined as:

Correct AnswerverifiedShow Answer

In the table given below Y represents the aggregate expenditure of the economy on C = consumption, I = investment, G = government projects, and X = net exports.? -Refer to Table 9.3. At an income level of $300, the average propensity to save equals:

Correct AnswerverifiedShow Answer

Dissaving occurs when the consumption function lies below the 45-degree line.

Correct AnswerverifiedShow Answer

Economists have proved that a substantial increase in income during a month does not affect consumption much in the short run unless it is perceived as a permanent increase.

Correct AnswerverifiedShow Answer

The average propensity to save (APS) is the proportion of disposable income that is saved.

Correct AnswerverifiedShow Answer

In the table given below Y represents the aggregate expenditure of the economy on C = consumption, I = investment, G = government projects, and X = net exports.? -Refer to Table 9.3. Calculate the marginal propensity to consume in the economy.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Dissaving occurs when:

Correct AnswerverifiedShow Answer

-Refer to Table 9.2. If a firm purchases the machine by taking out a one-year loan, how much interest will the firm have to pay?

Correct AnswerverifiedShow Answer

The United States introduced investment tax credit in 1962 and has continued to offer it till date. This has reduced the volatility of investments in the country.

Correct AnswerverifiedShow Answer

Other things equal, when the U.S. dollar depreciates, domestic exports rise at every level of domestic income.

Correct AnswerverifiedShow Answer

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