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
