Macro Econ Final Exam

With a marginal propensity to save of .4, the marginal propensity to consume will be: A. 1.0 minus .4. B. .4 minus 1.0. C. the reciprocal of the MPS. D. .4.

A. 1.0 minus .4.

The group of three economists appointed by the president to provide fiscal policy recommendations is the: A. Council of Economic Advisers. B. Joint Economic Committee. C. Bureau of Economic Analysis. D. Federal Reserve Board of Governors.

A. Council of Economic Advisers.

If the interest rate increases, there will be a(n): A. Decrease in the amount of money held as assets B. Decrease in the transactions demand for money C. Increase in the transactions demand for money D. Increase in the amount of money held as assets

A. Decrease in the amount of money held as assets

In which phase of the business cycle will the economy most likely experience rising real output and falling unemployment rates? A. Expansion B. Recession C. Peak D. Trough

A. Expansion

Generally speaking, the greater the MPS, the: A. Smaller would be the increase in income which results from an increase in consumption spending B. Larger would be the increase in income which results from an increase in consumption spending C. Larger would be the increase in income which results from a decrease in consumption spending D. Smaller would be the increase in income which results from a decrease in consumption spending

A. Smaller would be the increase in income which results from an increase in consumption spending

If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as: A. a medium of exchange. B. a store of value. C. a unit of account. an economic investment.

A. a medium of exchange.

If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as: A. a medium of exchange. B. a store of value. C. a unit of account. D. an economic investment.

A. a medium of exchange.

The total demand for money curve will shift to the right as a result of: A. an increase in nominal GDP. B. an increase in the interest rate. C. a decline in the interest rate. D. a decline in nominal GDP.

A. an increase in nominal GDP.

As disposable income goes up, the: A. average propensity to consume falls. B. average propensity to save falls. C. volume of consumption declines absolutely. D. volume of investment diminishes.

A. average propensity to consume falls.

The consumption schedule directly relates: A. consumption to the level of disposable income. B. saving to the level of disposable income. C. disposable income to domestic income. D. consumption to saving.

A. consumption to the level of disposable income.

Fiscal policy refers to the: A. deliberate changes in government spending and taxes to stabilize domestic output, employment, and the price level. B. deliberate changes in government spending and taxes to achieve greater equality in the distribution of income. C. altering of the interest rate to change aggregate demand. D. fact that equal increases in government spending and taxation will be contractionary.

A. deliberate changes in government spending and taxes to stabilize domestic output, employment, and the price level.

On a diagram where the interest rate and the quantity of money demanded are shown on the vertical and horizontal axes respectively, the total demand for money can be found by: A. horizontally adding the transactions and the asset demand for money. B. vertically subtracting the transactions demand from the asset demand for money. C. horizontally subtracting the asset demand from the transactions demand for money. D. vertically adding the transactions and the asset demand for money.

A. horizontally adding the transactions and the asset demand for money.

A contraction of the money supply: A. increases the interest rate and decreases aggregate demand. B. increases both the interest rate and aggregate demand. C. lowers the interest rate and increases aggregate demand. D. lowers both the interest rate and aggregate demand.

A. increases the interest rate and decreases aggregate demand.

If the MPS in an economy is .1, government could shift the aggregate demand curve rightward by $40 billion by: A. increasing government spending by $4 billion. B. increasing government spending by $40 billion. C. decreasing taxes by $4 billion. D. increasing taxes by $4 billion.

A. increasing government spending by $4 billion.

The purchasing power of money and the price level vary: A. inversely. B. directly during recessions, but inversely during inflations. C. directly, but not proportionately. D. directly and proportionately.

A. inversely.

Fiscal policy refers to the: A. manipulation of government spending and taxes to stabilize domestic output, employment, and the price level. B. manipulation of government spending and taxes to achieve greater equality in the distribution of income. C. altering of the interest rate to change aggregate demand. D. fact that equal increases in government spending and taxation will be contractionary.

A. manipulation of government spending and taxes to stabilize domestic output, employment, and the price level.

The desire to hold money for transactions purposes arises because: A. receipts of income and expenditures are not perfectly synchronized. B. people fear that prices will rise. C. households want money on hand in case a good financial investment opportunity arises. D. low interest rates reduce the opportunity cost of holding money.

A. receipts of income and expenditures are not perfectly synchronized.

A $70 price tag on a sweater in a department store window is an example of money functioning as a: A. unit of account. B. standard of deferred payments. C. store of value. D. medium of exchange.

A. unit of account.

If the cyclically-adjusted budget shows a deficit of about $100 billion and the actual budget shows a deficit of about $150 billion, it can be concluded that there is: A. Built-in stability B. A cyclical deficit C. An expansionary fiscal policy D. A contractionary fiscal policy

B. A cyclical deficit

The principal advantage money has over barter is its function as: A. A store of value B. A medium of exchange C. Unit of account D. Debt

B. A medium of exchange

Which would decrease investment demand? A. A decrease in business taxes B. An increase in the cost of acquiring capital goods C. An increase in the rate of technological change D. A decrease in the stock of capital goods on hand

B. An increase in the cost of acquiring capital goods

Which would shift the consumption schedule upward? A. A decrease in wealth B. An increase in wealth C. Consumer expectations of falling prices D. Consumer expectations of product surpluses

B. An increase in wealth

As disposable income decreases, consumption: A. And saving both increase B. And saving both decrease C. Increases and saving decreases D. Decreases and saving increases

B. And saving both decrease

The basic policy-making body in the U.S. banking system is the: A. Federal Open Market Committee (FOMC). B. Board of Governors of the Federal Reserve. C. Federal Monetary Authority. D. Council of Economic Advisers.

B. Board of Governors of the Federal Reserve.

In which of the following industries or sectors of the economy will business cycle fluctuations likely have the greatest effect on output? A. Military goods. B. Capital goods. C. Textile products. D. Agricultural commodities.

B. Capital goods.

In recent years, the Fed often communicated its intentions to restrict or expand monetary policy by announcing a change in targets for the: A. Exchange rate B. Federal funds rate C. Prime interest rate D. Consumer price index

B. Federal funds rate

The rate of unemployment when the economy is at its potential output is called the: A. Full-employment rate of unemployment B. Natural rate of unemployment C. Structural rate of unemployment D. Frictional rate of unemployment

B. Natural rate of unemployment

In which of the following cases would real income rise? A. Nominal income rises by 8 percent, and the price level rises by 10 percent. B. Nominal income rises by 2 percent, and the price level remains unchanged. C. Nominal income falls by 4 percent, and the price level fall by 4 percent. D. Real income will rise in all of the above cases.

B. Nominal income rises by 2 percent, and the price level remains unchanged.

When economists say that money serves as a medium of exchange, they mean that it is: A. a way to keep wealth in a readily spendable form for future use. B. a means of payment. C. a monetary unit for measuring and comparing the relative values of goods. D. declared as legal tender by the government.

B. a means of payment.

On a diagram where the interest rate and the quantity of money demanded are shown on the vertical and horizontal axes respectively, the transactions demand for money can be represented by: A. a line parallel to the horizontal axis. B. a vertical line. C. a downsloping line or curve from left to right. D. an upsloping line or curve from left to right.

B. a vertical line.

The amount by which government expenditures exceed revenues during a particular year is the: A. public debt. B. budget deficit. C. full-employment. D. GDP gap.

B. budget deficit.

Recurring upswings and downswings in an economy's real GDP over time are called: A. recessions. B. business cycles. C. output yo-yos. D. total product oscillations.

B. business cycles.

The MPC can be defined as that fraction of a: A. change in income that is not spent. B. change in income that is spent. C. given total income that is not consumed. D. given total income that is consumed.

B. change in income that is spent.

Countercyclical discretionary fiscal policy calls for: A. surpluses during recessions and deficits during periods of demand-pull inflation. B. deficits during recessions and surpluses during periods of demand-pull inflation. C. surpluses during both recessions and periods of demand-pull inflation. D. deficits during both recessions and periods of demand-pull inflation.

B. deficits during recessions and surpluses during periods of demand-pull inflation.

The production of durable goods varies more than the production of nondurable goods because: A. durables purchases are nonpostponable. B. durables purchases are postponable. C. the producers of nondurables have monopoly power. D. producers of durables are highly competitive.

B. durables purchases are postponable.

The most important determinant of consumption and saving is the: A. level of bank credit. B. level of income. C. interest rate. D. price level.

B. level of income.

The transactions demand for money is most closely related to money functioning as a: A. unit of account. B. medium of exchange. C. store of value. D. measure of value.

B. medium of exchange.

If you place a part of your summer earnings in a savings account, you are using money primarily as a: A. medium of exchange. B. store of value. C. unit of account. D. standard of value.

B. store of value.

If business taxes are reduced and the real interest rate increases: A. consumption and saving will necessarily increase. B. the level of investment spending might either increase or decrease. C. the level of investment spending will necessarily increase. D. the level of investment spending will necessarily decrease.

B. the level of investment spending might either increase or decrease.

As it relates to economic growth, the term long-run trend refers to: A. the long-run increase in the relative importance of durable goods in the U.S. economy. B. the long-term expansion or contraction of business activity that occurs over 50 or 100 years. C. fluctuations in business activity that average 40 months in duration. D. fluctuations in business activity that occur around Christmas, Easter, and other major holidays.

B. the long-term expansion or contraction of business activity that occurs over 50 or 100 years.

To say that coins are "token money" means that: A. their face value is less than their intrinsic value. B. their face value is greater than their intrinsic value. C. their face value is equal to their intrinsic value. D. they are not legal tender.

B. their face value is greater than their intrinsic value.

Stock market price quotations best exemplify money serving as a: A. store of value. B. unit of account. C. medium of exchange. D. index of satisfaction.

B. unit of account.

The asset demand for money: A. is unrelated to both the interest rate and the level of GDP. B. varies inversely with the rate of interest. C. varies inversely with the level of real GDP. D. varies directly with the level of nominal GDP.

B. varies inversely with the rate of interest.

The asset demand for money: A. is unrelated to both the interest rate and the level of GDP. B. varies inversely with the rate of interest. C. varies inversely with the level of real GDP. D. varies directly with the level of nominal GDP.

B. varies inversely with the rate of interest.

To say money is socially defined means that: A. money has been defined in a Constitutional amendment. B. whatever performs the functions of money extremely well is considered to be money. C. the money supply includes all public and private securities purchased by society. D. society, acting through Congress, specifies what shall be included in the money supply.

B. whatever performs the functions of money extremely well is considered to be money.

An economy is experiencing a high rate of inflation. The government wants to reduce consumption by $36 billion to reduce inflationary pressure. The MPC is .75. By how much should the government raise taxes to achieve its objective? A. $6 billion B. $9 billion C. $12 billion D. $16 billion

C. $12 billion

If nominal GDP is $600 billion and, on the average, each dollar is spent three times per year, then the amount of money demanded for transactions purposes will be: A. $1,800 billion. B. $600 billion. C. $200 billion. D. $1,200 billion.

C. $200 billion.

If actual GDP is $340 billion and there is a positive GDP gap of $20 billion, potential GDP is: A. $360 billion. B. $660 billion. C. $320 billion. D. $20 billion.

C. $320 billion.

If the annual inflation rate is 5 percent a year, about how many years will it take for the price level to double? A. 10 years B. 12 years C. 14 years D. 16 years

C. 14 years

A nation has a population of 300 million people. Of these, 80 million are retired, in the military, in institutions, or under 16 years old. There are 210 million who are employed and 10 million who are unemployed. What is the unemployment rate? A. 3.3 percent B. 3.6 percent C. 4.5 percent D. 5.2 percent

C. 4.5 percent

Moral hazard created during the financial crisis occurred because: A. Federal government bailed out large firms. B. Federal Reserve took a variety of actions as a lender of last resort. C. A and B D. Companies created collateralized default swaps.

C. A and B

Securitization refers to: A. Buying and selling securities. B. Insurance against potential losses due to defaults. C. Bundling loans, mortgages, and corporate bonds into new securities. D. All of the above.

C. Bundling loans, mortgages, and corporate bonds into new securities.

A newspaper headline reads: "Fed Cuts Federal Funds Rate for Fifth Time This Year." This headline indicates that the Federal Reserve is most likely trying to: A. Reduce inflation in the economy B. Raise interest rates C. Ease monetary policy D. Tighten monetary policy

C. Ease monetary policy

If the Congress passes legislation to cut taxes to counter the effects of a severe recession, then this would be an example of a: A. Political business cycle B. Contractionary fiscal policy C. Expansionary fiscal policy D. Nondiscretionary fiscal policy

C. Expansionary fiscal policy

Which is considered a strength of monetary policy compared to fiscal policy? A. The ability to increase the budget deficit B. The ability to decrease the budget surplus C. Its protection from political pressure D. Its cyclical asymmetry

C. Its protection from political pressure

Kevin has lost his job in an automobile plant because of the use of robots for welding on the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is: A. Cyclical B. Frictional C. Structural D. Natural

C. Structural

The level of GDP will tend to increase when: A. Reserve requirements are increased B. There is an increase in the discount rate C. The Federal Reserve buys government securities in the open market D. The Federal Reserve sells government securities in the open market

C. The Federal Reserve buys government securities in the open market

If the consumption schedule shifts downward, and the shift was not caused by a tax change, then the saving schedule: A. May shift either upward or downward B. Will shift downward C. Will shift upward D. Will not shift

C. Will shift upward

On a diagram where the interest rate and the quantity of money demanded are shown on the vertical and horizontal axes respectively, the asset demand for money can be represented by: A. a line parallel to the horizontal axis. B. a vertical line. C. a downsloping line or curve from left to right. D. an upsloping line or curve from left to right.

C. a downsloping line or curve from left to right.

When economists say that money serves as a unit of account, they mean that it is: A. a way to keep wealth in a readily spendable form for future use. B. a means of payment. C. a monetary unit for measuring and comparing the relative values of goods. D. declared as legal tender by the government.

C. a monetary unit for measuring and comparing the relative values of goods.

The phase of the business cycle in which real GDP declines is called: A. the peak. B. an expansion. C. a recession. D. the trough.

C. a recession.

If you are estimating your total expenses for school next semester, you are using money primarily as: A. a medium of exchange. B. a store of value. C. a unit of account. D. an economic investment.

C. a unit of account.

The 45-degree line on a graph relating consumption and income shows: A. all the points where the MPC is constant. B. all the points at which saving and income are equal. C. all the points at which consumption and income are equal. D. the amounts households will plan to save at each possible level of income.

C. all the points at which consumption and income are equal.

The multiplier effect means that: A. consumption is typically several times as large as saving. B. a change in consumption can cause a larger increase in investment. C. an increase in investment can cause GDP to change by a larger amount. D. a decline in the MPC can cause GDP to rise by several times that amount.

C. an increase in investment can cause GDP to change by a larger amount.

If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to: A. save is three-fifths. B. consume is one-half. C. consume is three-fifths. D. consume is two-fifths.

C. consume is three-fifths.

A decline in disposable income: A. increases consumption by moving upward along a specific consumption schedule. B. decreases consumption because it shifts the consumption schedule downward. C. decreases consumption by moving downward along a specific consumption schedule. D. increases consumption because it shifts the consumption schedule upward.

C. decreases consumption by moving downward along a specific consumption schedule.

If the MPC in an economy is .8, government could shift the aggregate demand curve rightward by $100 billion by: A. increasing government spending by $25 billion. B. increasing government spending by $80 billion. C. decreasing taxes by $25 billion. D. decreasing taxes by $100 billion.

C. decreasing taxes by $25 billion.

Which of the following statements is correct? Other things equal: A. a decline in real output will shift both the transactions demand curve for money and the total money demand curve to the right. B. a decline in the interest rate will shift the asset demand curve for money to the right but leave the total money demand curve unchanged. C. deflation will shift both the transactions demand curve for money and the total money demand curve to the left. D. inflation will shift the transactions demand curve for money to the right but leave the total money demand curve unchanged.

C. deflation will shift both the transactions demand curve for money and the total money demand curve to the left.

The size of the MPC is assumed to be: A. less than zero. B. greater than one. C. greater than zero, but less than one. D. two or more.

C. greater than zero, but less than one.

Discretionary fiscal policy refers to: A. any change in government spending or taxes that destabilizes the economy. B. the authority that the president has to change personal income tax rates. C. intentional changes in taxes and government expenditures made by Congress to stabilize the economy. D. the changes in taxes and transfers that occur as GDP changes.

C. intentional changes in taxes and government expenditures made by Congress to stabilize the economy.

If the amount of money demanded exceeds the amount supplied, the: A. demand-for-money curve will shift to the left. B. money supply curve will shift to the right. C. interest rate will rise. D. interest rate will fall.

C. interest rate will rise.

Discretionary fiscal policy is so named because it: A. is undertaken at the option of the nation's central bank. B. occurs automatically as the nation's level of GDP changes. C. involves specific changes in T and G undertaken expressly for stabilization at the option of Congress. D. is invoked secretly by the Council of Economic Advisers.

C. involves specific changes in T and G undertaken expressly for stabilization at the option of Congress.

Contractionary fiscal policy is so named because it: A. involves a contraction of the nation's money supply. B. necessarily reduces the size of government. C. is aimed at reducing aggregate demand and thus achieving price stability. D. is expressly designed to expand real GDP.

C. is aimed at reducing aggregate demand and thus achieving price stability.

Most economists agree that the immediate determinant of the volume of output and employment is the: A. composition of consumer spending. B. ratio of public goods to private goods production. C. level of total spending. D. size of the labor force.

C. level of total spending.

The average propensity to consume is defined as income divided by consumption.

FALSE

As a percent of GDP, the United States public debt is: A. the highest among major industrial nations. B. the lowest among major industrial nations. C. lower than the public debts of several other major industrial nations. D. higher than the percentages for Canada, Germany, and Italy.

C. lower than the public debts of several other major industrial nations.

Purchasing common stock by writing a check best exemplifies money serving as a: A. store of value. B. unit of account. C. medium of exchange. D. index of satisfaction.

C. medium of exchange.

In the United States, business cycles have occurred against a backdrop of a long-run trend of: A. declining unemployment. B. stagnant productivity growth. C. rising real GDP. D. rising inflation.

C. rising real GDP.

The asset demand for money is most closely related to money functioning as a: A. unit of account. B. medium of exchange. C. store of value. D. measure of value.

C. store of value.

The phase of the business cycle in which real GDP is at a minimum is called: A. the peak. B. a recession. C. the trough. D. the underside.

C. the trough.

The opportunity cost of holding money: A. is zero because money is not an economic resource. B. varies inversely with the interest rate. C. varies directly with the interest rate. D. varies inversely with the level of economic activity.

C. varies directly with the interest rate.

Stabilizing a nation's price level and the purchasing power of its money can be achieved: A. only with fiscal policy. B. only with monetary policy. C. with both fiscal and monetary policy. D. with neither fiscal nor monetary policy.

C. with both fiscal and monetary policy.

Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return on this tool is: A. 80 percent. B. 8 percent. C. 2 percent. D. 20 percent.

D. 20 percent.

In the consolidated balance sheet of the Federal Reserve Banks, loans to commercial banks are: A. A liability of the Federal Reserve Banks and commercial banks B. An asset of the Federal Reserve Banks and commercial banks C. A liability of the Federal Reserve Banks and an asset for commercial banks D. An asset of the Federal Reserve Banks and a liability for commercial banks

D. An asset of the Federal Reserve Banks and a liability for commercial banks

The programs enacted to bail out the financial system from crisis in 2007 and 2008 helped alleviate the moral hazard problem in the financial industry.

FALSE

An inverse relationship between the rate of interest and the level of: A. Income is suggested by the consumption function B. Prices is suggested by the aggregate supply curve C. Employment is suggested by the aggregate demand curve D. Investment spending is suggested by the investment-demand curve

D. Investment spending is suggested by the investment-demand curve

Which is an important consequence of the public debt of the United States? A. It will threaten to bankrupt the Federal government B. It transfers a portion of output from foreign nations to the U.S C. It decreases the inequality in the distribution of income in the U.S D. It leads to fewer incentives to bear risk and innovate

D. It leads to fewer incentives to bear risk and innovate

When changes to taxes and spending occur in the economy without explicit action by the Federal government, such policy is: A. Cyclical B. Variable C. Discretionary D. Nondiscretionary

D. Nondiscretionary

Which is an important problem associated with the public debt? A. Payments of interest on the debt lead to greater income equality B. Interest payments on the debt tend to improve economic incentives to work and produce more unemployment C. Government borrowing to finance the debt may increase the level of private investment D. Payment of interest on the debt held by foreigners transfers real resources abroad

D. Payment of interest on the debt held by foreigners transfers real resources abroad

As the economy declines, the collection of personal income tax revenues automatically falls. This relationship best describes how the progressive income tax system: A. Increases crowding out in the economy B. Decreases real interest rates in the economy C. Offsets the timing problem for fiscal policy D. Provides built-in stability for the economy

D. Provides built-in stability for the economy

A college graduate using the summer following graduation to search for a job would best be classified as: A. not officially a member of the labor force. B. a part of structural unemployment. C. a part of cyclical unemployment. D. a part of frictional unemployment.

D. a part of frictional unemployment.

Money functions as: A. a store of value. B. a unit of account. C. a medium of exchange. D. all of these.

D. all of these.

Currency in circulation is part of: A. M1 only. B. M2 only. C. neither M1 nor M2. D. both M1 and M2.

D. both M1 and M2.

The industries or sectors of the economy in which business cycle fluctuations tend to affect output most are: A. military goods and capital goods. B. services and nondurable consumer goods. C. clothing and education. D. capital goods and durable consumer goods.

D. capital goods and durable consumer goods.

The industries or sectors of the economy in which business cycle fluctuations tend to affect output the most are: A. military goods and capital goods. B. services and nondurable consumer goods. C. clothing and education. D. capital goods and durable consumer goods.

D. capital goods and durable consumer goods.

An economist who favors smaller government would recommend: A. tax cuts during recession and reductions in government spending during inflation. B. tax increases during recession and tax cuts during inflation. C. tax cuts during recession and tax increases during inflation. D. increases in government spending during recession and tax increases during inflation.

D. increases in government spending during recession and tax increases during inflation.

Expansionary fiscal policy is so named because it: A. involves an expansion of the nation's money supply. B. necessarily expands the size of government. C. is aimed at achieving greater price stability. D. is designed to expand real GDP.

D. is designed to expand real GDP.

The consumption schedule shows: A. that the MPC increases in proportion to GDP. B. that households consume more when interest rates are low. C. that consumption depends primarily on the level of business investment. D. the amounts households intend to consume at various possible levels of aggregate income.

D. the amounts households intend to consume at various possible levels of aggregate income.

During a severe recession, we would expect output to fall the most in: A. the health care industry. B. the clothing industry. C. agriculture. D. the construction industry.

D. the construction industry.

The most important determinant of consumer spending is: A. the level of household borrowing. B. consumer expectations. C. the stock of wealth. D. the level of income.

D. the level of income.

The Federal Open Market Committee (FOMC) is made up of: A. the chair of the Board of Governors along with the 12 presidents of the Federal Reserve Banks. B. the seven members of the Board of Governors along with the president of the New York Federal Reserve Bank. C. the seven members of the Board of Governors of the Federal Reserve System along with the three members of the Council of Economic Advisers. D. the seven members of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Banks presidents on a rotating basis.

D. the seven members of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Banks presidents on a rotating basis.

During periods of full employment the: A. burden of unemployment is quite evenly distributed among males and females, African-Americans and whites, and young and old workers. B. unemployment rate for teenagers is below the rate for the labor force as a whole. C. unemployment rate for women is considerably lower than that for men. D. unemployment rate for African-Americans is about twice the rate for whites.

D. unemployment rate for African-Americans is about twice the rate for whites.

(Consider This) Credit cards are defined as money because they facilitate transactions.

FALSE

An annual rate of inflation of 7 percent will double the price level in about 15 years

FALSE

Built-in stability is synonymous with discretionary fiscal policy.

FALSE

Demand-pull inflation can be restrained by increasing government spending and reducing taxes.

FALSE

During the past ten years, the annual rate of inflation in the United States has averaged less than 1 percent.

FALSE

Expansionary fiscal policy is so named because it involves an expansion of the nation's money supply.

FALSE

If the Hennige family's marginal propensity to consume is .70, then it will necessarily consume seven-tenths of its total income.

FALSE

If the MPC is constant at various levels of income, then the APC must also be constant at all of those income levels.

FALSE

Laws passed in the late 1990s restricted the activities of financial firms to narrowly defined services they could provide, prompting the financial crisis of 2007 and 2008.

FALSE

1 - MPC = MPS.

TRUE

A contractionary fiscal policy shifts the aggregate demand curve leftward.

TRUE

As part of its response to the financial crisis of 2007 and 2008, Federal Reserve Banks began paying interest on reserve deposits.

TRUE

Fidelity, Putnam, Janus, and Vanguard are examples of mutual fund companies.

TRUE

If DI is $275 billion and the APC is 0.8, we can conclude that saving is $55 billion.

TRUE

If the MPC in the economy is .75, government could shift the aggregate demand curve rightward by $30 billion by cutting taxes by $10 billion.

TRUE

If the price level doubled in a 23-year period, we can conclude that the average annual rate of inflation over that period was about 3 percent.

TRUE

Unanticipated inflation benefits debtors at the expense of creditors.

TRUE

Unanticipated inflation helps some groups in the economy.

TRUE