Macroeconomics Test 2 Part 2
In contrast to investment, consumption is: A. relatively unstable. B. relatively stable. C. measurable. D. unmeasurable.
B
A decline in the real interest rate will: A. increase the amount of investment spending. B. shift the investment schedule downward. C. shift the investment demand curve to the right. D. shift the investment demand curve to the left.
A
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
If Trent's MPC is .80, this means that he will: A. spend eight-tenths of any increase in his disposable income. B. spend eight-tenths of any level of disposable income. C. break even when his disposable income is $8,000. D. save two-tenths of any level of disposable income.
A
If the MPC is .70 and investment increases by $3 billion, the equilibrium GDP will: A. increase by $10 billion. B. increase by $2.10 billion. C. decrease by $4.29 billion. D. increase by $4.29 billion.
A
If the MPC is .8 and disposable income is $200, then: A. consumption and saving cannot be determined from the information given. B. saving will be $20. C. personal consumption expenditures will be $80. D. saving will be $40.
A
Investment spending in the United States tends to be unstable because: A. profits are highly variable. B. the price level fluctuates rapidly. C. investment spending is affected by interest rates. D. capital wears out quickly and must be replaced often.
A
Refer to the given diagram. Consumption will be equal to income at: A. an income of E. B. an income of F. C. point C. D. point D.
A
Refer to the given graph. A movement from b to a along C1 might be caused by a(n): A. recession. B. wealth effect of an increase in stock market prices. C. decrease in income tax rates. D. increase in saving.
A
The wealth effect is shown graphically as a: A. shift of the consumption schedule. B. movement along an existing consumption schedule. C. shift of the investment schedule. D. movement along an existing investment schedule.
A
When consumption and saving are graphed relative to real GDP, an increase in personal taxes will shift: A. both the consumption and saving schedules downward. B. both the consumption and saving schedules upward. C. the consumption schedule upward and the saving schedule downward. D. the consumption schedule downward and the saving schedule upward.
A
Which of the following is correct? A. APC + APS = 1. B. APC + MPS = 1. C. APS + MPC = 1. D. APS + MPS = 1.
A
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
Dissaving means: A. the same thing as disinvesting. B. that households are spending more than their current incomes. C. that saving and investment are equal. D. that disposable income is less than zero.
B
If the marginal propensity to consume is .9, then the marginal propensity to save must be: A. 1. B. .1. C. 1.1. D. .9.
B
The APC is calculated as: A. change in consumption/change in income. B. consumption/income. C. change in income/change in consumption. D. income/consumption.
B
The investment demand curve portrays an inverse (negative) relationship between: A. investment and real GDP. B. the real interest rate and investment. C. the nominal interest rate and investment. D. the price level and investment.
B
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.
B
In the late 1990s, the U.S. stock market boomed, causing U.S. consumption to rise. Economists refer to this outcome as the: A. Keynes effect. B. interest-rate effect. C. wealth effect. D. multiplier effect.
C
The investment demand curve will shift to the right as the result of: A. the availability of excess production capacity. B. an increase in business taxes. C. businesses becoming more optimistic about future business conditions. D. an increase in the real interest rate.
C
The multiplier is: A. 1/MPC. B. 1/(1 + MPC). C. 1/MPS. D. 1/(1 - MPS).
C
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
At the point where the consumption schedule intersects the 45-degree line: A. the MPC equals 1. B. the APC is zero. C. saving equals income. D. saving is zero.
D
Other things equal, a decrease in the real interest rate will: A. shift the investment demand curve to the right. B. shift the investment demand curve to the left. C. move the economy upward along its existing investment demand curve. D. move the economy downward along its existing investment demand curve.
D
Refer to the diagram. Which of the following would shift the investment demand curve from ID1 to ID2? A. A lower interest rate. B. Lower expected rates of return on investment. C. A higher interest rate. D. Higher expected rates of return on investment.
D
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 multiplier is useful in determining the: A. full-employment unemployment rate. B. level of business inventories. C. change in the rate of inflation from a change in the interest rate. D. change in GDP resulting from a change in spending.
D
The size of the multiplier is equal to the: A. slope of the consumption schedule. B. reciprocal of the slope of the consumption schedule. C. slope of the saving schedule. D. reciprocal of the slope of the saving schedule.
D
Which one of the following will cause a movement down along an economy's consumption schedule? A. An increase in stock prices. B. A decrease in stock prices. C. An increase in consumer indebtedness. D. A decrease in disposable income.
D
