macro chpt 10

According to the table, when disposable income is $470 billion, what is the savings? Multiple choice question. $25 billion $15 billion $20 billion $40 billion

$20 billion

If marginal propensity to consume equals 0.6 and the change in income is $12 billion, what is the change in consumption? Multiple choice question. $12.6 billion $2 billion $5 billion $7.2 billion

$7.2 billion

Disposable income rises by $20 billion to $40 billion. Households consume $15 billion of the increase and save $5 billion of that income. What is the marginal propensity to consume (MPC)? Multiple choice question. 0.25 1.75 1 0.75

0.75

The direct relationship between MPC and the multiplier is shown in the following equation: Multiple choice question. 1/MPC 1/(1-MPC) MPC/1 1-MPC

1/(1-MPC)

The owner of a manufacturing company is considering whether or not to invest in a new sanding machine that costs $1,000. Net expected revenue after installation of the machine is $1,100. What is the expected rate of return? Multiple choice question. 12% 110% 10% 8%

10%

Real interest rates are rates adjusted for what? Multiple choice question. Rate of return Unemployment Inflation Investment

Inflation

Consumption and disposable income have what kind of relationship? Multiple choice question. Positive There is no relationship Negative

Positive

1/(1-MPC) is what formula? Multiple choice question. The multiplier formula The consumption formula The MPS formula The MPC formula

The multiplier formula

The nominal interest rate minus the rate of inflation equals what? Multiple choice question. Business investment The real interest rate The expected rate of return The rate of investment

The real interest rate

The nominal interest rate minus the rate of inflation equals what? Multiple choice question. The expected rate of return The real interest rate The rate of investment Business investment

The real interest rate

The average propensity to consume and the average propensity to save together equal

one

A business is thinking about investing in a new piece of equipment. The expected of return helps the business make the decision about whether or not to invest.

rate

What does saving divided by income equal? Multiple choice question. Marginal propensity to save Average propensity to save Marginal propensity to consume Average propensity to consume

Average propensity to save

What is the primary factor that determines the amounts that households will consume and save? Multiple choice question. Interest rates Wealth Disposable income Borrowing

Disposable income

Select all that apply Which of the following are determinants of household consumption and savings? Multiple select question. Interest rates Wealth Investment Borrowing Trade balance

Interest rates Wealth Borrowing

Most of the fluctuations in output and employment over time are due to changes in what? Multiple choice question. Consumption Government spending Net exports Investment

Investment

Which of the following has historically had the greatest swings in spending? Multiple choice question. Investment Net exports Government spending Consumption

Investment

Because the fraction of any change in income not consumed is saved, which of the following equations is true? Multiple choice question. MPC = 1 + MPS MPC + MPS = 2 MPC - MPS = 1 MPC + MPS = 1

MPC + MPS = 1

What happens to the investment demand curve when there is an increase in demand? Multiple choice question. Shifts to the right There is a movement along the demand curve No change Shifts to the left

Shifts to the right

The fraction or percentage of total income that is consumed is called the: Multiple choice question. consumption function spending multiplier average propensity to consume marginal propensity to consume

average propensity to consume

Total consumption divided by total disposable income equals the ______. Multiple choice question. average propensity to save marginal propensity to save average propensity to consume the marginal propensity to consume

average propensity to consume

The fraction of total income that is saved is called the: Multiple choice question. marginal propensity to save average propensity to consume average propensity to save marginal propensity to consume

average propensity to save

In the figure, an increase in acquisition, maintenance, and operating costs affects the investment demand curve _____. Multiple choice question. by shifting it from ID2 to ID1 by shifting it from ID0 to ID1 by shifting it from ID0 to ID2

by shifting it from ID0 to ID2

Any factor that leads businesses to collectively expect lower rates of return on their investments ______ investment demand. Multiple choice question. Not enough information to determine decreases causes no change to increases

decreases

Any factor that leads businesses to collectively expect lower rates of return on their investments ______ investment demand. Multiple choice question. decreases causes no change to increases Not enough information to determine

decreases

There is a(n) relationship between spending and GDP.

direct

The consumption schedule shows the various amounts that households plan to consume at each level of: Multiple choice question. nominal GDP consumption & savings investment disposable income

disposable income

Since disposable income is either consumed or saved, the fraction of any disposable income consumed plus the fraction saved must be ______. Multiple choice question. equal to 1 less than 0 equal to zero greater than 1

equal to 1

Increases in investment demand occur when businesses collectively expect: Multiple choice question. higher marginal tax rates greater rates of return on their investments lower returns on productivity lower rates of return on their investments

greater rates of return on their investments

Increases in investment demand occur when businesses collectively expect: Multiple choice question. lower returns on productivity greater rates of return on their investments lower rates of return on their investments higher marginal tax rates

greater rates of return on their investments

The paying of taxes drains off some of the additional consumption spending created by the increases in ______. Multiple choice question. supply income interest rates inflation

income

Any factor that leads businesses collectively to expect greater rates of return on their investments ______ investment demand. Multiple choice question. stabilizes increases decreases stalls

increases

Any factor that leads businesses collectively to expect greater rates of return on their investments ______ investment demand. Multiple choice question. stalls increases stabilizes decreases

increases

A firm's spending on new plants, capital equipment, machinery, and inventory is all considered ______. Multiple choice question. saving consumption spending investment nominal spending

investment

The economic term for "extra" or "a change in" is: Multiple choice question. additional next average marginal

marginal

The ratio of a change in consumption to a change in the income that caused the consumption change is called the Multiple choice question. marginal propensity to consume. marginal propensity to save. average propensity to save. average propensity to consume.

marginal propensity to consume.

A change in saving divided by a change in income is equal to the Multiple choice question. marginal propensity to consume. average propensity to consume. marginal propensity to save. average propensity to save.

marginal propensity to save.

When real interest rates fall, households tend to borrow ______, consume ______ and save _______. Multiple choice question. less, more, less less, less, less more, more, more more, less, more more, more, less

more, more, less

A business purchases a new piece of equipment. Another firm earns income from this sale and with this income builds a new factory. The contractor that built the factory earns income and uses the income to take a vacation. The resort earns income from the contractor. This scenario describes the: Multiple choice question. multiplier effect multiplier system law of supply law of investment demand

multiplier effect

When developing macroeconomic models, economists change their focus from the relationship between consumption and disposable income to the relationship between consumption and ______. Multiple choice question. personal income real GDP NDP nominal GDP

real GDP

Any factor that leads businesses to collectively expect lower rates of return on their investments _____. Multiple choice question. increases investment demand reduces investment demand increases output reduces output

reduces investment demand

Any factor that leads businesses to collectively expect lower rates of return on their investments _____. Multiple choice question. reduces output increases investment demand increases output reduces investment demand

reduces investment demand

In terms of the investment demand curve, an increase in demand is represented by a(n) ______ shift and a decrease in demand is represented by a(n) ______ shift. Multiple choice question. downward; upward rightward; upward leftward; rightward rightward; leftward

rightward; leftward

The economy supports repetitive, continuous flows of ______ and income through which dollars spent by Smith are received as income by Chin and then spent by Chin and received as income by Gonzales, and so on. Multiple choice question. spending exports savings productivity

spending

Select all that apply Spending on ______ drains off some of the additional consumption created by the increases in income. Multiple select question. taxes imports exports capital goods

taxes imports

The inverse relationship between interest rates and quantity of investment conforms to ______. Multiple choice question. opportunity cost the law of supply marginal utility the law of demand

the law of demand

Select all that apply To economists, the term "aggregate" means ______. Multiple select question. maximum narrow specific total combined

total combined

Economists use what term to mean "total" or "combined"? Multiple choice question. Schedule Aggregate Compiled Group

Aggregate

What does saving divided by income equal? Multiple choice question. Marginal propensity to consume Average propensity to consume Marginal propensity to save Average propensity to save

Average propensity to save

propensity to save equals saving divided by income.

Blank 1: Average

spending consists of expenditures on new plants, capital equipment, machinery, and inventories.

Blank 1: Investment or Capital

The fraction of total income that is saved equals the propensity to save. (Enter one word.)

Blank 1: average

The propensity to consume is the fraction or percentage of total income that is consumed.

Blank 1: average

The schedule shows the various amounts that households would plan to spend at each of the various levels of disposable income.

Blank 1: consumption

Average propensity to consume equals total divided by total disposable income.

Blank 1: consumption or consumed

When real interest rates (increase/decrease), households tend to borrow more, consume more, and save less.

Blank 1: decrease, fall, decline, drop, lower, or lessen

When developing macroeconomic models, economists change their focus from the relationship between consumption and income to the relationship between consumption and real GDP.

Blank 1: disposable

Consumption is positively related to disposable (one word).

Blank 1: income

The relationship between interest rates and quantity of investment conforms to the law of demand.

Blank 1: inverse, negative, indirect, downward sloping, or downsloping

A change in acquisition, maintenance and operating costs affect the demand curve by shifting it left or right depending on whether the costs go up or down.

Blank 1: investment

The change in consumption divided by the change in income is equal to the propensity to consume.

Blank 1: marginal

The fraction of any change in income not consumed is, by definition, the to . This explains why the marginal propensity to consume plus this fraction of any change equals one. (Enter one word in each blank.)

Blank 1: marginal Blank 2: propensity Blank 3: save

In economic terms means "extra" or "a change in".

Blank 1: marginal, margin, incremental, or delta

The average propensity to consume and the average propensity to save together equal .

Blank 1: one or 1

According to the table, is $30 billion when disposable income is $510 billion.

Blank 1: saving or savings

The marginal propensity to save is equal to a change in divided by a change in income. (Enter one word in the blank.)

Blank 1: saving or savings

The relationship between spending and GDP is? Multiple choice question. Not enough information to determine There is no relationship Indirect Direct

Direct

The relationship between spending and GDP is? Multiple choice question. There is no relationship Not enough information to determine Indirect Direct

Direct

What is the primary factor that determines the amounts that households will consume and save? Multiple choice question. Interest rates Disposable income Wealth Borrowing

Disposable income