Question 1

The figure given below represents the saving function of an economy. Figure 9.1  Refer to Figure 9.1.An increase in autonomous consumption would be illustrated by:

Accepted Answer

A)  an upward shift of the saving function.
B)  a downward shift of the saving function.
C)  a downward shift of the corresponding consumption function.
D)  a movement to the right along the saving function.
E)  a movement to the left along the saving function.F) None of the above
G) C) and E)

Question 2

MPI refers to the percentage of additional domestic income spent on imports.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following will cause the investment function to shift upward?

Accepted Answer

A)  An decrease in government subsidies to businesses
B)  An increase in business profits
C)  A decline in capacity utilization
D)  Expectations of higher business taxes
E)  An increase in the market rate of interestF) D) and E)
G) B) and D)

Question 5

Suppose that the consumption function crosses the 45-degree line at a disposable income level of $800.Assume further that saving equals $200 when disposable income is $1, 300.This implies that the MPC must equal 0.6.

Accepted Answer

A) True 
 B)False

Question 6

The table given below reports the consumption expenditure of a nation at different levels of disposable income. Table 9.1
 Refer to Table 9.1.At an income level of $10, 000, the APS equals -0.20.Therefore, the APC has to equal:

Accepted Answer

A)  0.20.
B)  0.80.
C)  -1.20.
D)  1.20.
E)  1.80.F) B) and E)
G) All of the above

Question 7

Changes in autonomous consumption will affect the slope of the consumption function.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False  False

Question 9

If it is assumed that there are absolutely no taxes in an economy, then aggregate consumption will be drawn as a function of:

Accepted Answer

A)  disposable income.
B)  real GDP.
C)  government expenditure.
D)  private income.
E)  government transfers.F) D) and E)
G) B) and E)

Question 10

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

Accepted Answer

A)  0.10
B)  0.20
C)  0.25
D)  0.50
E)  0.75F) A) and B)
G) A) and C)

Question 11

Other things equal, a marginal propensity to import of 0.8 implies that a $100 million increase in domestic income will lead to an $80 million decrease in net exports.

Accepted Answer

A) True 
 B)False

Question 12

The income net of taxes is called _____.

Accepted Answer

A)  real income
B)  disposable income
C)  nominal income
D)  taxable income.
E)  personal income.F) B) and E)
G) A) and C)

Question 13

As disposable income rises:

Accepted Answer

A)  consumption falls as a percentage of disposable income.
B)  the average propensity to consume increases.
C)  saving falls as a percentage of disposable income.
D)  the average propensity to consume remains unchanged.
E)  consumption rises as a percentage of disposable income.F) C) and D)
G) A) and E)

Question 14

The table given below reports the consumption expenditure of a nation at different levels of disposable income. Table 9.1
 Refer to Table 9.1.When disposable income is $20, 000, consumption spending equals:

Accepted Answer

A)  $24, 500.
B)  $15, 000.
C)  $18, 500.
D)  $19, 500.
E)  $18, 000.F) A) and C)
G) B) and C) D

Question 15

As household wealth increases, it will experience a(n) :

Accepted Answer

A)  increase in its MPC.
B)  decrease in autonomous consumption.
C)  decrease in its MPS.
D)  increase in autonomous consumption.
E)  increase in autonomous saving.F) None of the above
G) A) and B)

Question 16

What would be the impact of an increase in foreign income on the net export function?

Accepted Answer

A)  The net export function would shift upward.
B)  The net export function would shift downward.
C)  The slope of the net export function would increase.
D)  The slope of the net export function would decrease.
E)  There would be a movement up along the net export function.F) D) and E)
G) C) and D)

Question 17

The figure given below shows the aggregate expenditures function of an economy. Figure 9.5 1Y2 B) DE C) Y2Y3 D) BC E) AB" class="answers-bank-image d-inline" rel="preload" > Refer to Figure 9.5.The amount of government spending is indicated by the distance _____.

Accepted Answer

A)  Y1Y2
B)  DE
C)  Y2Y3
D)  BC
E)  ABF) D) and E)
G) B) and C)

Question 18

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) C) and E)
G) A) and B)

Question 19

The figure given below shows the consumption functions of an economy. Figure 9.4 1  to C3? A) An increase in household wealth B) A decrease in the proportion of young people in the population C) An increase in the size of the population D) A decrease in consumer confidence E) An autonomous decrease in saving" class="answers-bank-image d-inline" rel="preload" > Refer to Figure 9.4.Which of the following could explain a downward shift of the consumption function from C1  to C3?

Accepted Answer

A)  An increase in household wealth
B)  A decrease in the proportion of young people in the population
C)  An increase in the size of the population
D)  A decrease in consumer confidence
E)  An autonomous decrease in savingF) A) and B)
G) C) and E)

Question 20

Which of the following would cause a change in imports?

Accepted Answer

A)  A change in foreign income
B)  A change in foreign consumption
C)  A change in domestic tastes for foreign products
D)  A change in foreign tastes for domestic products
E)  A change in domestic investment spendingF) A) and B)
G) A) and C)

Exam 13: Aggregate Expenditures

The figure given below represents the saving function of an economy. Figure 9.1 Refer to Figure 9.1.An increase in autonomous consumption would be illustrated by:

Correct AnswerverifiedShow Answer

MPI refers to the percentage of additional domestic income spent on imports.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedTrue

Which of the following will cause the investment function to shift upward?

Correct AnswerverifiedShow Answer

Suppose that the consumption function crosses the 45-degree line at a disposable income level of $800.Assume further that saving equals $200 when disposable income is $1, 300.This implies that the MPC must equal 0.6.

Correct AnswerverifiedShow Answer

The table given below reports the consumption expenditure of a nation at different levels of disposable income. Table 9.1 Refer to Table 9.1.At an income level of $10, 000, the APS equals -0.20.Therefore, the APC has to equal:

Correct AnswerverifiedShow Answer

Changes in autonomous consumption will affect the slope of the consumption function.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedFalse

If it is assumed that there are absolutely no taxes in an economy, then aggregate consumption will be drawn as a function of:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things equal, a marginal propensity to import of 0.8 implies that a $100 million increase in domestic income will lead to an $80 million decrease in net exports.

Correct AnswerverifiedShow Answer

The income net of taxes is called _____.

Correct AnswerverifiedShow Answer

As disposable income rises:

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The table given below reports the consumption expenditure of a nation at different levels of disposable income. Table 9.1 Refer to Table 9.1.When disposable income is $20, 000, consumption spending equals:

Correct AnswerverifiedD

As household wealth increases, it will experience a(n) :

Correct AnswerverifiedShow Answer

What would be the impact of an increase in foreign income on the net export function?

Correct AnswerverifiedShow Answer

The figure given below shows the aggregate expenditures function of an economy. Figure 9.5 Refer to Figure 9.5.The amount of government spending is indicated by the distance _____.

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

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The figure given below shows the consumption functions of an economy. Figure 9.4 Refer to Figure 9.4.Which of the following could explain a downward shift of the consumption function from C1 to C3?

Correct AnswerverifiedShow Answer

Which of the following would cause a change in imports?

Correct AnswerverifiedShow Answer

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True

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False

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D

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The figure given below shows the consumption functions of an economy. Figure 9.4 Refer to Figure 9.4.Which of the following could explain a downward shift of the consumption function from C₁ to C₃?

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