Macro Test 3 Multiple Choice Practice
A change in interest rates would shift the consumption schedule and the saving schedule ___; a change in taxes would shift these two schedules___. a) in the same direction; in opposite directions b) in opposite directions; in the same direction c) in opposite directions; also in opposite directions d) in the same direction; also in the same direction
in opposite directions; in the same direction
Answer the question on the basis of the following consumption schedules. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. (1) (2) (3) DI C DI C DI C $0 $4 $0 $65 $0 $2 10 11. 80 125. 20 20 20 18. 160 185 40 38 30 25 240 245 60 56 40 32 320 305 80 74 50 39 400 365 100 92 Refer to the given data. The marginal propensity to save: a) cannot be determined from the data given b) is highest in economy (1) c) is highest in economy (2) d) is highest in economy (3)
is highest in economy (1)
Answer the question on the basis of the following consumption schedules. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars. (1) (2) (3) DI C DI C DI C $0 $4 $0 $65 $0 $2 10 11. 80 125. 20 20 20 18. 160 185 40 38 30 25 240 245 60 56 40 32 320 305 80 74 50 39 400 365 100 92 Refer to the given date. At an income level of $40 billion, the average propensity to consume: a) is highest in economy (1) b) is highest in economy (2) c) is highest in economy (3) d) cannot be determined from the data given.
is highest in economy (2)
The most important determinant of consumption and saving is the: a) level of bank credit b) interest rate c) level of income d) price level
level of income
The practical significance of the multiplier is that it: a) equates the real interest rate and the expected rate of return on investment b) helps to stabilize the economy c) magnifies initial changes in spending into larger changes in GDP d) keeps inflation within tolerable limits
magnifies initial changes in spending into larger changes in GDP
If consumers expect prices to rise and shortages to occur in the future, then there will be a shift: a) downward of both the consumption and saving schedules b) of the consumption schedule downward and the saving schedule upward c) upward of both the consumption and saving schedules d) of the consumption schedule upward and the saving schedule downward
of the consumption schedule upward and the saving schedule downward
If the real interest rate in the economy is i and the expected rate of return on additional investment is r, then more investment will be forthcoming when: a) i rises b) i is greater than r c) r falls d) r is greater than i
r is greater than i
Assume that MPS is 0.4. If spending increases by $8 billion, then real GDP will increase by: a) $15 billion b) $13.5 billion c) $20 billion d) $8 billion
$20 billion
Disposable Income Consumption $200 $205 225 225 250 245 275 265 300 285 Refer to the given data. If disposable income was $325, we would expect consumption to be: a) $305 b) $315 c) $290 d) $20
$305
Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by: a) $2 billion b) $3 billion c) $2/3 billion d) $6 billion
$6 billion
Disposable Income Consumption $10,000 $12,000 18,000 18,000 26,000 24,000 34,000 30,000 42,000 36,000 50,000 42,000 Refer to the consumption schedule above. If disposable income is $42,000, then saving is: a) $6,000 b)$2,000 c) $0 d) $4,000
$6,000
If disposable income increases from $912 to $927 billion and MPC=0.6 then consumption will increase by: a) $56 billion b) $9 billion c) $6 billion d) $54 billion
$9 billion
An increase in taxes will shift both the consumption schedule and the saving schedule down. True or False
True
Built-in stability is exemplified by the fact that with a progressive tax system, net tax revenues decrease when GDP decreases. T/F
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. T/F
True
If the government wants to reduce unemployment using fiscal policy, it may do so by increasing government spending. T/F
True
When the economy is experiencing demand-pull inflation, its real GDP tends to be rising. True or False
True
An expansionary fiscal policy is shown as a: leftward shift in the economy's aggregate supply curve. leftward shift in the economy's aggregate demand curve. rightward shift in the economy's aggregate demand curve. movement along an existing aggregate demand curve.
rightward shift in the economy's aggregate demand curve.
The multiplier is defined as: a) 1- MPS b) change in GDP/initial change in spending c) change in GDP x initial change in spending d) change in GDP - initial change in spending
change in GDP/ initial change in spending
1-MPC=MPS True or False
True
A contractionary fiscal policy shifts the aggregate demand curve leftward. T/F
True
Refer to the diagram. If equilibrium real output is Q2, then: a) the equilibrium price level is P2 b) the equilibrium price level is P1 c) producers will supply output level Q1 d) aggregate demand is AD1
A
Refer to the figure above. The economy is at equilibrium at point B. What would expansionary fiscal policy do? Move the economy from point B towards point A Move the economy from point B downward along AD2 Move the economy from point B towards point C Move the economy from point B upward along AD2
A
Answer the question on the basis of the following data for a hypothetical economy. Disposable Income Saving $0 -$10 50 0 100 10 150 20 200 30 Refer to the given data. If plotted on a graph, the slope of the saving schedule would be: a) .80 b) .20 c) .15 d) .10
.20
With an MPS of 0.3, the MPC will be: a) 0.3 b) 1/0.3 c) 1-0.3 d) 0.3-1
1-0.3
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) 2% b) 8% c) 80% d) 20%
20%
An $18 billion increase in spending creates $18 billion of new income in the first round of the multiplier process and $13.5 billion in the second round. The multiplier in the economy is: a) 5 b) 3 c) 4 d) 2
4
If the MPC is 0.75, the multiplier will be: a) 4 b) 3.5 c) 3 d) 2
4
A major advantage of the built-in or automatic stabilizers is that they: require no legislative action by Congress to be made effective. simultaneously stabilize the economy and reduce the absolute size of the public debt. guarantee that the federal budget will be balanced over the course of the business cycle. automatically produce surpluses during recessions and deficits during inflations.
A
A specific reduction in government spending will dampen demand-pull inflation by a greater amount the: smaller is the economy's MPS. flatter is the economy's aggregate supply curve. smaller is the economy's MPC. less is the economy's built-in stability.
A
An increase in expected future income will: a) Increase aggregate demand b) Increase aggregate demand and aggregate supply c) Decrease aggregate demand and aggregate supply d) Increase aggregate supply
A
Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: Real Output Demanded. Price Level. Real Output Supplied $200 300 $500 300 250 450 400 200 400 500 150 300 600 100 200 Refer to the data. If the amount of real output demanded at each price level falls by $200, this might have been caused by: a worsening of business expectations. a decrease in the personal income tax. an increase in net exports. an increase in consumer wealth.
A
Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: Real Output Demanded. Price Level. Real Output Supplied $200 300 $500 300 250 450 400 200 400 500 150 300 600 100 200 Refer to the data. The equilibrium price level will be: 200. 150. 300. 250.
A
Answer the question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Gvmt Spending. Tax Revenues. GDP Y1. $450 $425 $2,000 Y2. 500 450 3,000 Y3. 600 500 4,000 Y4. 640 620 5,000 Y5. 680 580 4,800 Y6. 600 620 5,000 Refer to the data. The budget deficit in year 3 is: $100 billion. $295 billion. $175 billion. $3,050 billion.
A
Automatic stabilizers smooth fluctuations in the economy because they produce changes in the government's budget that: Help offset changes in GDP Reinforce changes in GDP Produce a cyclically-adjusted budget Produce a standardized budget
A
Crowding out is a decrease in private investment caused by: Increased borrowing by the government Increased taxation by the government Increased exports to buyers in other nations Increased consumer spending by households
A
Discretionary fiscal policy refers to: intentional changes in taxes and government expenditures made by Congress to stabilize the economy. any change in government spending or taxes that destabilizes the economy. the authority that the president has to change personal income tax rates. the changes in taxes and transfers that occur as GDP changes.
A
Graphically, cost-push inflation is shown as a: leftward shift of the AS curve. leftward shift of the AD curve. rightward shift of the AD curve. rightward shift of the AS curve.
A
If the MPS in an economy is .1, government could shift the aggregate demand curve rightward by $40 billion by: increasing government spending by $4 billion. decreasing taxes by $4 billion. increasing government spending by $40 billion. increasing taxes by $4 billion.
A
If the dollar appreciates relative to foreign currencies, then: Foreign buyers will find U.S. goods become more expensive U.S. goods will look cheaper to foreign buyers Foreign goods will look more expensive to U.S. buyers Net exports of the U.S. will increase
A
In the diagram, a shift from AS1 to AS2 might be caused by: a decrease in the prices of domestic resources. an increase in the prices of imported resources. stricter government regulations. an increase in business taxes.
A
Prices and wages tend to be: A) flexible both upward and downward. C) flexible downward, but inflexible upward. B) inflexible both upward and downward. D) flexible upward, but inflexible downward.
A
Refer to the graph above. Assume that the economy is in a recession with a price level of P1 and output level Q1. The government then adopts an appropriate discretionary fiscal policy. What will be the most likely new equilibrium price level and output? P2 and Q2 P2 and Q4 P1 and Q1 P1 and Q3
A
The public debt is the: Accumulation of all past deficits minus all past surpluses Difference between current government expenditures and current tax revenues Amount of U.S. paper currency in circulation Ratio of all past deficits to all past surpluses
A
Which combination of factors would most likely increase aggregate demand? An increase in consumer wealth and a decrease in interest rates An increase in personal taxes and a decrease in government spending An increase in household indebtedness and a decrease in net exports An increase in business taxes and a decrease in profit expectations
A
Which of the following fiscal policy changes would be the most expansionary? A $40 billion increase in government spending A $20 billion tax cut and $20 billion increase in government spending A $10 billion tax cut and $30 billion increase in government spending A $40 billion tax cut
A
Which of the following serves as an automatic stabilizer in the economy? The progressive income tax The inflation rate Exchange rates Interest rates
A
Which of the following will not cause the consumption schedule to shift? a) A change in consumer incomes. b) A sharp increase in the amount of wealth held by households. c) The expectation of a recession. d) A growing expectation that consumer durables will be short in supply.
A change in consumer incomes.
Use the following diagrams for the U.S. economy to answer the following question. Which of the diagrams best portrays the effects of an increase in foreign spending on U.S. products?
AD1 and AD2 shifting right, AS trending upwards
Which of the diagrams best portrays the effects of declines in the incomes of U.S. trading partners?
AD1 shifting left to AD2, AS upward slope
Suppose a family's consumption exceeds its disposable income. This means that its: a) APS is positive b) MPS is negative c) MPC is greater than 1 d) APC is greater than 1
APC is greater than 1
Use the following diagrams for the U.S. economy to answer the following question. Which of the diagrams best portrays the effects of a decrease in the availability of key natural resources?
AS1 shifting left (decreasing) to AS2, AD decreasing slope
Use the following diagrams for the U.S. economy to answer the following question. Which of the diagrams best portrays the effects of an increase in resource productivity?
AS1 shifting left to AS2, AD downward slope
Which of the diagrams best portrays the effects of an increase in resource productivity?
AS1 shifts right to AS2, AD slopes downward
A budget surplus means that: A nation's imports are greater than its exports Government revenues are greater than expenditures in a given year Government expenditures are greater than revenues in a given year A nation's exports are greater than its imports
B
A decrease in consumer spending can be expected to shift the: Aggregate expenditures curve upward and the aggregate demand curve rightward Aggregate expenditures curve downward and the aggregate demand curve leftward Aggregate expenditures curve upward and the aggregate demand curve leftward Aggregate expenditures curve downward and the aggregate demand curve rightward
B
A decrease in interest rates caused by a change in the price level would cause a(n): Increase (or shift right) in aggregate demand Increase in the quantity of real output demanded (or movement down along AD) Decrease in the quantity of real output demanded (or movement up along AD) Decrease (or shift left) in aggregate demand
B
A sharp rise in the real value of stock prices, which is independent of a change in the price level, would best be an example of: The real-balances effect A change in real value of consumer wealth A change in the degree of excess capacity The interest-rate effect
B
An increase in productivity will: Decrease aggregate supply and aggregate demand Increase aggregate supply Increase aggregate demand Increase aggregate supply and aggregate demand
B
How is the public debt calculated? By subtracting the government's total liabilities from its total assets By cumulating the annual difference between tax revenues and government spending over the years By cumulating the annual government purchases over time By subtracting current government spending from current government tax revenues
B
In the diagram, a shift from AS1 to AS3 might be caused by a(n): a) decrease in the prices of domestic resources. b) increase in the prices of imported resources. c) decrease in business taxes. d) increase in productivity.
B
Refer to the diagram, in which Qf is the full-employment output. If the economy's current aggregate demand curve is AD3, it would be appropriate for the government to: increase government expenditures or reduce taxes. reduce government expenditures or increase taxes. reduce government expenditures and taxes by equal-size amounts. reduce unemployment compensation benefits.
B
Refer to the diagram, where T is tax revenues and G is government expenditures. All figures are in billions of dollars. If the full-employment GDP is $400 billion while the actual GDP is $200 billion, the actual budget deficit is: $200 billion. $40 billion. $60 billion. $20 billion.
B
Which of the following fiscal policy changes would be the most contractionary? A $30 billion increase in taxes and a $10 billion cut in government spending A $10 billion increase in taxes and a $30 billion cut in government spending A $20 billion increase in taxes and a $20 billion cut in government spending A $40 billion increase in taxes
B
A contractionary fiscal policy is shown as a: rightward shift in the economy's aggregate supply curve. rightward shift in the economy's aggregate demand curve. leftward shift in the economy's aggregate demand curve. movement along an existing aggregate demand curve.
C
A decrease in expected returns on investment will most likely shift the AD curve to the: Left because C will decrease Right because C will increase Left because Ig will decrease Right because Ig will increase
C
A fall in labor costs will cause aggregate: Supply to decrease Demand to increase Supply to increase Demand to decrease
C
An expected increase in the prices of consumer goods in the near future will: a) Decrease in the quantity of real output demanded (or movement up along AD) b) Decrease (or shift left) in aggregate demand now c) Increase (or shift right) in aggregate demand now d) Increase in the quantity of real output demanded (or movement down along AD)
C
An increase in personal income tax rates will cause a(n): Increase in the quantity of real output demanded (or movement down along AD) Increase (or shift right) in aggregate demand Decrease (or shift left) in aggregate demand Decrease in the quantity of real output demanded (or movement up along AD)
C
Answer the question based on the following list of items that are related to aggregate demand and/or aggregate supply. 1- Government Spending 2- Consumer Expectations 3- Degree of Excess Capacity 4- Personal Income Tax Rates 5- Productivity 6- National Income Abroad 7- Business Taxes 8- Domestic Resource Availability 9- Prices of Imported Products 10- Profit Expectations on Investments Refer to the list above. Changes in which combination of factors best explain why the aggregate supply curve would shift? 1 and 2 3 and 6 7 and 8 2 and 10
C
Answer the question on the basis of the following aggregate demand and supply schedules for a hypothetical economy: Real Output Demanded. Price Level. Real Output Supplied $200 300 $500 300 250 450 400 200 400 500 150 300 600 100 200 Refer to the data. If the amount of real output demanded at each price level falls by $200, the equilibrium price level and equilibrium level of real domestic output will fall to: 150 and $200, respectively. 250 and $200, respectively. 150 and $300, respectively. 200 and $300, respectively.
C
If the dollar appreciates in value relative to foreign currencies: a) Aggregate demand increases because C increases b) Aggregate demand decreases because C decreases c) Aggregate demand decreases because net exports decrease d) Aggregate demand increases because net exports increase
C
In the diagram, a shift from AS2 to AS3 might be caused by a(n): a) decrease in interest rates. b) decrease in the prices of domestic resources. c) increase in business taxes and costly government regulation. d) decrease in the price level.
C
In the diagram, a shift from AS3 to AS2 might be caused by an increase in: the prices of imported resources. the prices of domestic resources. productivity. business taxes and government regulation.
C
Refer to the diagram, in which Qf is the full-employment output. The shift of the aggregate demand curve from AD1 to AD2 is consistent with: a contractionary fiscal policy. severe demand-pull inflation. an expansionary fiscal policy. a major recession.
C
Refer to the figure above. The economy is at equilibrium at point A. What fiscal policy would be most appropriate to control demand-pull inflation? Shift aggregate demand by decreasing taxes Shift aggregate supply by increasing taxes Shift aggregate demand by increasing taxes Shift aggregate demand by increasing government spending
C
The economy experiences an increase in the price level and an increase in real domestic output. Which is a likely explanation? Wage rates have fallen Business taxes have increased Net exports have increased Interest rates have increased
C
The goal of expansionary fiscal policy is to increase: The price level Unemployment Real GDP Aggregate supply
C
Wage contracts, efficiency wages, and the minimum wage are explanations for why: The aggregate demand curve slopes downward There is little support for the existence of a real-balances effect Wages tend to be inflexible downward Competition results in price wars
C
Which of the following represents the most expansionary fiscal policy? A $10 billion decrease in government spending. A $10 billion tax cut. A $10 billion increase in government spending. A $10 billion tax increase.
C
With cost-push inflation in the short run, there will be: An increase in real GDP A leftward shift in the aggregate demand curve A decrease real GDP A decrease in unemployment
C
If Matt's disposable income increases from $4,000 to $4,500 and his level of saving increases from $200 to $325, it may be concluded that his marginal propensity to: a) Save is .30. b) Consume is .75 c) Consume is .80 d) Consume is .60
Consume is .75
Answer the question based on the following list of factors that are related to the aggregate demand curve. Which of the above factors best explain the downward slope of aggregate demand curve? 1- Real-Balances Effect 2- Household Expectations 3- Interest-Rate Effect 4- Personal Income Tax Rates 5- Profit Expectations 6- National Income Abroad 7- Government Spending 8- Foreign Purchases Effect 9- Exchange Rates 10- Degrees of Excess Capacity a) 7, 9, and 10 b) 2, 4, and 6 c) 4, 6, and 7 d) 1, 3, and 8
D
Due to automatic stabilizers, when the nation's total income rises, government transfer spending: And tax revenues decrease And tax revenues increase Increases and tax revenues decrease Decreases and tax revenues increase
D
If the U.S. dollar appreciates in value relative to foreign currencies, then this will: Increase aggregate demand and aggregate supply Decrease aggregate demand and aggregate supply Increase aggregate demand and decrease aggregate supply Decrease aggregate demand and increase aggregate supply
D
In the figure, AD1 and AS1 represent the original aggregate supply and demand curves and AD2 and AS2 show the new aggregate demand and supply curves. The change in aggregate supply from AS1 to AS2 could be caused by: the real-balances, interest-rate, and foreign purchases effects. an increase in business taxes. a reduction in the price level. the increase in productivity.
D
In the figure, AD1 and AS1 represent the original aggregate supply and demand curves and AD2 and AS2 show the new aggregate demand and supply curves. The changes in aggregate demand and supply in the diagram produce: a higher price level. an expansion of real output and a stable price level. a decline in real output and a stable price level. an expansion of real output and a higher price level.
D
Refer to the diagram, in which Qf is the full-employment output. If aggregate demand curve AD1 describes the current situation, appropriate fiscal policy would be to: do nothing since the economy appears to be achieving full-employment real GDP. increase taxes and reduce government spending to shift the aggregate demand curve rightward to AD2. reduce taxes on businesses to shift the aggregate supply curve leftward. reduce taxes and increase government spending to shift the aggregate demand curve from AD1 to AD2.
D
Refer to the diagram, in which Qf is the full-employment output. If the economy's current aggregate demand curve is AD0, it would be appropriate for the government to: reduce government expenditures or increase taxes. reduce unemployment compensation benefits. reduce government expenditures and taxes by equal-size amounts. increase government expenditures or reduce taxes.
D
Refer to the diagram. If the aggregate supply curve shifted from AS0 to AS1 and the aggregate demand curve remains at AD0, we could say that: aggregate supply has increased, equilibrium output has decreased, and the price level has increased. an increase in the amount of output supplied has occurred. aggregate supply has increased and the price level has risen to G. aggregate supply has decreased, equilibrium output has decreased, and the price level has increased.
D
The fear of unwanted price wars may explain why many firms are reluctant to: expand production capacity when an increase in aggregate demand occurs. reduce wages when a decline in aggregate demand occurs. provide wage increases when labor productivity rises. reduce prices when a decline in aggregate demand occurs.
D
The real-balances effect on aggregate demand suggests that a: Higher price level will increase the real value of many financial assets and therefore cause an increase in spending Lower price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending Lower price level will decrease the real value of many financial assets and therefore cause an increase in spending Lower price level will increase the real value of many financial assets and therefore cause an increase in spending
D
The two reasons why bankruptcy is a false concern about the public debt are: Government spending and taxation Saving and investment Investment and refinancing Refinancing and taxation
D
The amount of consumption in an economy correlates: a) directly with the level of disposable income b) inversely with the level of disposable income c) directly with the rate of interest d) directly with the level of saving
Directly with the level of disposable income.
1+MPS=MPC True or False
False
A decrease in taxes is one way to pursue a contractionary fiscal policy because it will make government revenues contract. T/F
False
Demand-pull inflation can be restrained by increasing government spending and reducing taxes. T/F
False
If households do not spend any extra income they receive but instead save the entire extra amount, then the multiplier will be zero. True or False
False
Minimum wage laws tend to make the price level more flexible rather than less flexible. True or False
False
The goal of expansionary fiscal policy is to rein in inflation. T/F
False
A firm invests in a new machine that costs $5,000 a year but which is expected to produce an increase in total revenue of $5,200 a year. The current real rate of interest is 7 percent. The firm should: a) Undertake the investment because the expected rate of return of 10% is greater than the real rate of interest b) Not undertake the investment because the expected rate of return of 6% is less than the real rate of interest c) Undertake the investment because the expected rate of return of 8% is greater than the real rate of interest d) Not undertake the investment because the expected rate of return of 4% is less than the real rate of interest
Not undertake the investment because the expected rate of return of 4% is less than the real rate of interest
If the real interest rate increases: a) The investment demand curve will shift to the right b) There will be a movement downward along the investment demand curve c) There will be a movement upward along the investment demand curve d) The investment demand curve will shift to the left
There will be a movement upward along the investment demand curve
Generally speaking, the greater the MPS, the: a) Larger 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 a decrease in consumption spending c) Smaller would be the increase in income which results from an increase in consumption spending d) Smaller would be the increase in income which results from a decrease in consumption spending
Smaller would be the increase in income which results from an increase in consumption spending
A change in business taxes and regulation can affect production costs and aggregate supply. True or False
True
Which of the following would shift the saving schedule upward? a) consumer expectations of rising prices of products b) increased optimism about future incomes c) a decrease in real interest rates d) a decrease in wealth
a decrease in wealth
A high rate of inflation is likely to cause a: a) high nominal interest rate b) low nominal interest rate c) low rate of growth of nominal GDP d) decrease in nominal wages
a high nominal interest rate
As disposable income decreases, consumption: a) increases and saving decreases b) and saving both decrease c) and saving both increase d) decreases and saving increases
and saving both decrease
As disposable income goes up, the: a) volume of consumption declines absolutely b) average propensity to save falls c) volume of investment diminishes d) average propensity to consume falls
average propensity to consume falls
As disposable income decreases, the: a) average propensity to consume increases b) level of saving increases c) level of consumption increases d) average propensity to consume decreases
average propensity to consume increases
The fraction, or percentage, of total income which is consumed is called the: a) break-even income b) marginal propensity to consume c) average propensity to consume d) consumption schedule
average propensity to consume.
The fraction or percentage of total income which is saved is called the: a) Average propensity to save. b) Disposable income schedule. c) Marginal propensity to save. d) Saving schedule.
average propensity to save
A decrease in government spending will cause a(n): Increase in the quantity of real output demanded Increase in aggregate demand Decrease in the quantity of real output demanded Decrease in aggregate demand
decrease aggregate demand
A decline in disposable income: a) increases consumption by moving upward along a specific consumption schedule b) increases consumption because it shifts the consumption schedule upward c) decreases consumption because it shifts the consumption schedule downward d) decreases consumption by moving downward along a specific consumption schedule
decreases consumption by moving downward along a specific consumption schedule
Graphically, demand-pull inflation is shown as a: leftward shift of the AS curve along a downsloping AD curve. rightward shift of the AD curve along a downsloping AS curve. rightward shift of the AD curve along an upsloping AS curve. leftward shift of the AS curve along an upsloping AD curve.
rightward shift of the AD curve along an upsloping AS curve.
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 a decrease in consumption spending c) larger would be the increase in income which results from an increase in consumption spending d) smaller would be the increase in income which results from a decrease in consumption spending
smaller would be the increase in income which results from an increase in consumption spending
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
spend eight-tenths of any increase in his disposable income
If a family's MPC is 0.7, it means that the family is: a) operating at the break even point b) necessarily dissaving c) spending 70% of its disposable income d) spending seven tenths of any increment to its income
spending seven tenths of any increment to its income
The consumption schedule is such that: a) the MPC is constant and the APC declines as income rises. b) both the APC and the MPC increase as income rises. c) the APC is constant and the MPC declines as income rises. d) the MPC and the APC must be equal at all levels of income.
the MPC is constant and the APC declines as income rises.
Which of the following will not tend to shift the consumption schedule upward? a) a currently low level of household debt b) the expectation of a future decline in the consumer price index c) a currently small stock of durable goods in the possession of consumers d) the expectation of future shortages of essential consumer goods
the expectation of a future decline in the consumer price index
The investment demand curve suggests: a) that an increase in business taxes will tend to stimulate investment spending b) that changes in the real interest rate will not affect the amount invested c) there is a direct relationship between the real rate of interest and the level of investment spending d) there is an inverse relationship between the real rate of interest and the level of investment spending
there is an inverse relationship between the real rate of interest and the level of investment spending