econ chptr 8
As the MPS decreases, the multiplier will A) increase. B) decrease. C) remain constant. D) either increase or decrease depending on the size of the change in investment.
A
Consumption is A) positively related to household income and wealth and householdsʹ expectations about the future, but negatively related to interest rates. B) negatively related to household income and wealth, interest rates, and householdsʹ expectations about the future. C) determined only by income. D) positively related to household income and wealth, interest rates, and householdsʹ expectations about the future.
A
Firms react to unplanned increases in inventories by A) reducing output. B) increasing output. C) increasing planned investment. D) increasing consumption
A
If aggregate output equals planned aggregate expenditure, then A) unplanned inventory investment is zero. B) unplanned inventory adjustment is negative. C) unplanned inventory adjustment is positive. D) actual investment is greater than planned investment.
A
If the consumption function is below the 45-degree line, A) consumption is less than income and saving is positive. B) consumption is less than income and saving is negative. C) consumption exceeds income and saving is positive. D) consumption exceeds income and saving is negative
A
In a closed economy with no government, aggregate expenditure is A) consumption plus investment. B) saving plus investment. C) consumption plus the MPC. D) MPC + MPS.
A
Which of the following is an investment? A) the purchase of a new printing press by a business B) the purchase of a corporate bond by a household C) the purchase of a share of stock by a household D) a leveraged buyout of one corporation by another
A
Firms react to unplanned inventory reductions by A) reducing output. B) increasing output. C) reducing planned investment. D) increasing consumption
B
Higher interest rates are likely to A) have no effect on consumer spending or saving. B) decrease consumer spending and increase consumer saving. C) decrease both consumer spending and consumer saving. D) increase consumer spending and decrease consumer saving.
B
If unplanned business investment is $20 million and planned investment is $20 million, then actual investment is A) $20 million. B) $40 million. C) -$20 million. D) $200 million
B
In macroeconomics, equilibrium is defined as that point at which A) saving equals consumption. B) planned aggregate expenditure equals aggregate output. C) planned aggregate expenditure equals consumption. D) aggregate output equals consumption minus investment.
B
The ratio of the change in the equilibrium level of output to a change in some autonomous variable is the A) elasticity coefficient. B) multiplier. C) automatic stabilizer. D) marginal propensity of the autonomous variable
B
Which of the following is *NOT* considered investment? A) The acquisition of capital goods B) The purchase of government bonds C) The increase in planned inventories D) The construction of a new factory
B
A decrease in planned investment causes A) output to increase. B) output to decrease, but by a smaller amount than the decrease in investment. C) output to decrease, but by a larger amount than the decrease in investment. D) output to decrease by an amount equal to the decrease in investment
C
Aggregate output will increase if there is a(n) A) increase in saving. B) unplanned rise in inventories. C) unplanned fall in inventories. D) decrease in consumption
C
If aggregate output is greater than planned spending, then A) unplanned inventory investment is zero. B) unplanned inventory investment is negative. C) unplanned inventory investment is positive. D) actual investment equals planned investment
C
If autonomous consumption increases, the size of the multiplier would A) increase. B) decrease. C) remain constant. D) either increase or decrease depending on the size of the change in autonomous consumption.
C
If planned investment exceeds actual investment, A) there will be an accumulation of inventories. B) there will be no change in inventories. C) there will be a decline in inventories. D) none of the above
C
If the MPS is .05, the MPC is A) -0.05. B) 2.25. C) 0.95. D) 1.05.
C
If unplanned inventory investment is positive, then A) planned investment must be zero. B) planned aggregate spending must be greater than aggregate output. C) planned aggregate spending must be less than aggregate output. D) planned aggregate spending must equal aggregate output.
C
Over which component of investment do firms have the least amount of control? A) purchases of new equipment B) construction of new factories C) changes in inventories D) building new machines
C
Related to the Economics in Practice on p. 154 [466]: According to the ʺparadox of thrift,ʺ increased efforts to save will cause a(n) A) increase in income and an increase in overall saving. B) increase in income but no overall change in saving. C) decrease in income and an overall decrease in saving. D) decrease in income but an increase in saving.
C
Saving is a ________ variable and savings is a ________ variable. A) flow; flow B) stock; stock C) flow; stock D) stock; flow
C
The Tiny Tots Toy Company manufactures only sleds. In 2007 Tiny Tots manufactured 10,000 sleds, but sold only 8,000 sleds. In 2007 Tiny Totsʹ change in inventory was A) -2,000 sleds. B) 1,000 sleds. C) 2,000 sleds. D) 3,000 sleds
C
The fraction of a change in income that is consumed or spent is called A) the marginal propensity of income. B) the marginal propensity to save. C) the marginal propensity to consume. D) average consumption
C
Uncertainty about the future is likely to A) increase current spending. B) have no impact on current spending. C) decrease current spending. D) either increase or decrease current spending.
C
If Wandaʹs income is reduced to zero after she loses her job, her consumption will be ________ and her saving will be ________. A) less than zero; less than zero B) greater than zero; greater than zero C) less than zero; greater than zero D) greater than zero; less than zero
D
Related to the Economics in Practice on p. 154 [466]: According to the ʺparadox of thrift,ʺ as individuals increase their saving, A) income in the economy increases because there is more money available for firms to invest. B) income in the economy increases because interest rates will fall and the economy will expand. C) income in the economy will remain constant because the change in consumption equals the change in saving. D) income in the economy will fall because the decreased consumption that results from increased saving causes the economy to contract.
D
The economy can be in equilibrium if, and only if, A) planned investment is zero. B) actual investment is zero. C) planned investment is greater than actual investment. D) planned investment equals actual investment
D
Without the government or the foreign sector in the income-expenditure model, planned aggregate expenditure equals A) consumption plus actual investment. B) consumption plus inventory adjustment. C) consumption minus planned investment. D) consumption plus planned investment.
D
