Macro test 3
A decline in the real interest rate will: A) increase the amount of investment spending B) shift the investment demand curve to the left C) shift the investment schedule downward D) shift the investment demand curve to the right
A
A decrease in consumer spending can be expected to shift the: A) aggregate expenditures curve downward and the aggregate demand curve leftward B) aggregate expenditures curve downward and the aggregate demand curve rightward C) aggregate expenditures curve upward and the aggregate demand curve rightward D) aggregate expenditures curve upward and the aggregate demand curve leftward
A
A decrease in interest rates caused by a change in the price level would cause a: A) increase in the quantity of real output demanded (or movement down along AD) B) decrease (or shift left) in aggregate demand C) decrease in the quantity of real output demanded (or movement up along AD) D) increase (or shift right) in aggregate demand
A
A decrease in interest rates caused by a change in the price level would cause a: A) increase in the quantity of real output demanded (or movement down along AD) B) increase (or right shift) in aggregate demand C) decrease (or shift left) in aggregate demand D) decrease in the quantity of real output demanded (or movement up along AD)
A
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: A) a change in real value of consumer wealth B) a change in the degree of excess capacity C) the interest-rate effect D) the real-balances effect
A
An increase in household wealth that creates a wealth effect would shift the: A) consumption schedule upward and the saving schedule downward B) consumption schedule downward and the saving schedule upward C) consumption schedule and the saving schedule downward D) consumption schedule and the saving schedule upward
A
An increase in personal income tax rates will cause a: A) decrease (or shift left) in aggregate demand B) decrease in the quantity of real output demanded (or movement up along AD) C) increase in the quantity of real output demanded( or movement down along AD) D) increase (or shift right) in aggregate demand
A
As disposable income goes up, the: A) Average propensity to consume falls B) volume of consumption declines absolutely C) average propensity to save falls D) Volume of investment diminishes
A
Dissaving occurs when A) consumption exceeds income B) saving exceeds income C) saving exceeds consumption D) income exceeds consumption
A
Given the expected rate of return on all possible investment opportunities in the economy: A) an increase in the real rate of interest will reduce the level of investment B) a decrease in the real rate of interest will reduce the level of investment C) an increase in the real interest rate will increase the level of investment D) a change in the real interest rate will have no impact on the level of investment
A
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) consume is .75 B) consume is .80 C) consume is .60 D) consume is .30
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) save two-tenths of any level of disposable income D) break even when his disposable income is $8,000
A
If households in the economy save more of any extra income that they earn, then the multiplier effect will: A) decrease B) increase C) be unaffected D) become less than 1.0
A
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
If the U.S. dollar appreciates in value relative to foreign currencies, then this will: A) decrease aggregate demand and increase aggregate supply B) increase aggregate demand and aggregate supply C) decrease aggregate demand and aggregate supply D) increase aggregate demand and decrease aggregate supply
A
If the U.S. dollar appreciates in value relative to foreign currencies, then this will: A) decrease aggregate demand and increase aggregate supply B) increase aggregate demand and aggregate supply C) increase aggregate demand and decrease aggregate supply D) decrease aggregate demand and aggregate supply
A
If the dollar appreciates in value relative to foreign currencies: A) aggregate demand decreases because net exports decrease B) aggregate demand increases because C increases C) aggregate demand decreases because C decreases D) aggregate demand increases because net exports increase
A
If the dollar appreciates relative to foreign currencies, then. A) Foreign buyers will find U.S> goods become more expensive B) Foreign goods will look more expensive to U.S. buyers C) Net exports of the U.S. will increase D) U.S. goods will look cheaper to foreign buyers
A
If the government wishes to increase the level of real GDP, it might reduce: A) taxes B) transfer payments C) the size of the budget deficit D) the purchases of goods and services
A
One can determine the amount of any level of total income that is consumed by: A) multiplying total income by the APC B) multiplying the total income by the MPC C) subtracting the MPS from the total income D) multiplying total income by the slope of the consumption schedule
A
Personal saving is equal to: A) disposable income minus consumption B) consumption divided by disposable income C) consumption minus disposable income D) Disposable income plus consumption
A
Prices and wages tend to be A) flexible upward, but inflexible downward B) flexible downward, but inflexible upward C) inflexible both upward and downward D) flexible both upward and downward
A
The foreign purchases, interest rate, and real-balances effects explain why the: A) aggregate demand curve is downward-sloping B) Aggregate expenditures schedule may shift up or down C) Economy will adjust towards equilibrium D) aggregate demand curve may shift to the left or right
A
The fraction, or percentage, of total income which is consumed is called the: A) average propensity to consume B) marginal propensity to consume C) break-even income D) consumption schedule
A
Which combination of factors would most likely increase aggregate demand? A) an increase in consumer wealth and a decrease in interest rates B) An increase in personal taxes and a decrease in government spending C) An increase in household indebtedness and a decrease in net exports
A
Which of the following fiscal policy changes would be the most expansionary ? A) a $40 billion increase increase in government spending B) a $20 billion tax cut and $20 billion increase in government spending C) A $10 billion tax cut and $30 billion increase in government spending D) A $40 billion tax cut
A
Which of the following will not cause the consumption schedule to shift? A) A change in consumer incomes B) the expectation of a recession C) a growing expectation that consumer durables will be in short supply D) A sharp increase in the amount of wealth held by households
A
an increase in productivity will: A) increase aggregate supply B) increase aggregate demand C) increase aggregate supply and aggregate demand D) decrease aggregate supply and aggregate demand
A
One can determine the amount of any level of total income that is consumed by: A) multiplying total income by the slope of the consumption schedule B) multiplying total income by the APC C) subtracting the MPS from total income D) multiplying total income by the MPC
B
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) 20 percent C) 8 percent D) 2 percent
B
The amount of consumption in an economy correlates: A) directly with the rate of interest B) directly with the level of disposable income C) inversely with the level of saving D) directly with the level of saving
B
The fraction, or percentage, of total income which is saved is called the: A) Saving schedule B) Average propensity to save C) Marginal propensity to save D) Disposable income schedule
B
The intent of contractionary fiscal policy is to: A) increase aggregate demand B) decrease aggregate demand C) increase aggregate supply D) decrease aggregate supply
B
The investment demand curve suggests: A) that an increase in business taxes will tend to simulate investment spending B) there is an inverse relationship between the real rate of interest and the level of investment spending C) there is a direct relationship between the real rate of interest and the level of investment spending D) the changes in the real interest rate will affect the amount invested
B
The multiplier is useful in determining the: A) change in the rate of inflation from a change in the interest rate B) change in GDP resulting from a change in spending C) full-employment unemployment rate D) level of business inventories
B
The real- balances effect on aggregate demand suggests that a: A) lower price level will decrease the real value of many financial assets and therefore cause an increase in spending B) Lower price level will increase the real value of many financial assets and therefore cause an increase in spending C) Lower price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending D) Higher price level will increase the real-value of many financial assets and therefore cause an increase in spending
B
The two reasons why bankruptcy is a false concern about the public debt are: A) government spending and taxation B) refinancing and taxation C) investment and refinancing
B
Which of the following fiscal policy changes would most contractionary? A) a $40 million increase in taxes B) a $10 billion increase in taxes and a $30 billion cut in government spending C) a $20 billion increase in taxes and a $20 billion cut in government spending D) a $30 billion increase in taxes and a $10 billion cut in government spending
B
a decline in the real estate will: A) shift the investment schedule downward B) increase the amount of investment spending C) shift the investment demand curve to the right D) shift the investment demand curve to the left
B
if disposable income increases from $912 to $927 billion and MPC =0.6, then the consumption will increase by: A) $56 billion B) $9 billion C) $6 billion D) $54 billion
B
if the nominal interest rate is 18 percent and the real interest rate is 6 percent, then the inflation rate is A) 6 percent B) 12 percent C) 24 percent D) 18 percent
B
A decrease in expected returns on investment will most likely shift the AD curve to the: A) right because Ig will increase B) right because C will increase C) left because Ig will decrease D) left because C will decrease
C
A decrease in government spending will cause a: A) increase in the quantity of real output demanded B) increase in aggregate demand C) decrease in aggregate demand D) decrease in the quantity of real output demanded
C
A major advantage of the built-in or automatic stabilizers is that they: A) simultaneously stabilize the economy and reduce the absolute size of the public debt B) automatically produce surpluses during recessions and deficits during inflations C) require no legislative action by Congress to be made effective D) guarantee that the federal budget will be balanced over the course of the business cycle
C
A major reason that the public debt cannot bankrupt the Federal government is because A) the public debt is mostly held by foreigners B) the Federal Government has the Social Security Trust Fund C) The public debt can easily refinanced by issuing new bonds D) The Federal Government can draw on its gold reserves
C
A rightward shift of the investment demand curve might be caused by: A) an increase in the price level B) a decline in the real interest rate C) business planning to increase their stock of inventories D) an increase in business taxes
C
A specific reduction in government spending will dampen demand-pull inflation by a greater amount the: A) smaller is the economy's MPC B) flattr is the economy's aggregate supply curve C) smaller is the economy's MPS D) less is the economy's built-in stability
C
A specific reduction in government spending will dampen demand-pull inflation by a greater amount the: A) smaller is the economy's aggregate B) flatter is the economy's aggregate supply curve C) smaller is the economy's MPS D) less is the economy's built-in stability
C
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 0.75. 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
An expected increase in the prices of the consumer goods in the near future will: A) increase in the quantity of real output demanded (or movement down along AD) B) decrease in the quantity of real output demanded (or movement up along AD) C) increase (o right shift) in aggregate demand now D) demand (or shift left) in aggregate demand now
C
If congress passed new laws significantly increasing the regulation of business, this action would tend to: A) increase per-unit production costs and shift the aggregate supply curve to the right B) increase per-unit production costs and shift the aggregate demand curve to the left C) increase per-unit production costs and shift the aggregate supply curve to the left D) decrease per-unit production costs and shift the aggregate supply curve to the left
C
Refer to the diagram, which Qr is the full-employment output. If aggregate demand curve AD1 describes the current situation, appropriate fiscal policy would be to: A) increase taxes and reduce government spending to shift the aggregate demand curve rightward to AD2 B) reduce taxes on business to shift the aggregate supply curve leftward C) reduce taxes and increase government spending to shift the aggregate demand curve from AD1 to AD2 D) do nothing since the economy appears to be achieving full-employment real GDP
C
The fear of unwanted price wars may explain why many firms are reluctant to: A) expand production capacity when an increase in aggregate demand occurs B) provide wage increases when labor productivity rises C) reduce prices when a decline in aggregate demand occurs D) reduce wages when a decline in aggregate demand occurs
C
The following are important problems associated with the public debt, except: A) payments of interest on the debt lead to greater income inequality B) interest payments on the debt tend tp reduce economic incentives to work, and invest C) Government borrowing to finance the debt may lead to too much private investment D) payment of interest on the debt held by foreigners would send real resources abroad
C
The fraction, or percentage, of total income which is consumed is called the: A) Consumption schedule B) marginal propensity to consume C) Average propensity to consume D) Break-even income
C
The goal of expansionary fiscal is to increase: A) the price level B) aggregate supply C) real GDP D) unemployment
C
The goal of expansionary fiscal policy is to increase: A) the price level B) aggregate supply C) real GDP D) unemployment
C
The public debt is the: A) amount of U.S. paper currency to circulation B) Ratio of all pasts deficits to all past surpluses C) Accumulation of all past deficits minus all past surpluses D) Difference between current government expenditures and current tax revenues
C
Which combination of of factors would most likely increase aggregate demand? A) an increase in personal taxes and a decrease in government spending B) An increase in business taxes and a decrease in profit expectations C) An increase in consumer wealth and a decrease in interest rates D) an increase in household indebtedness and a decrease in net exports
C
The foreign purchases, interest rate, and real-balances effects explain why the: A) aggregate demand curve may shift to the left or right B) aggregate expenditures schedule may shift up or down C) economy will adjust towards equilibrium D) aggregate demand curve is downward-sloping
D
The most important determinant of consumption and saving is the: A) interest rate B) price level C) level of bank credit D) level of income
D
The practical significance of the multiplier is that it: A) keeps inflation within tolerable limits B) helps stabilize the economy C) equates the real interest rate and the expected rate of return on investment D) Magnifies initial changes in spending into larger changes in GDP
D
Which of the following serves as an automatic stabilizer in the economy? A) interest rates B) exchange rates C) the inflation rate D) the progressive income tax
D
Which of the following serves as an automatic stabilizer in the economy? A) interest rates B) exchange rates C) the inflation rate D) the progressive income tax
D
Which of the following would shift the saving schedule upward? A) Increase optimism about future incomes B) A decrease in real interest rates C) Consumer expectations of rising prices of products D) a decrease in wealth
D
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) increases consumption because it shifts the consumption schedule upward D) decreases consumption by moving downward along a specific consumption schedule
D
a decrease in expected returns on investment will most likely shift the AD curve to the: A) left because C will decrease B) right because Ig will increase C) right because C will increase D) left because Ig will decrease
D
A decrease in government spending and a cut in taxes would be a pair of fiscal policies that reinforce each other True or false
false
Minimum wage laws tend to make the price level more flexible rather than less flexible True or false
false
1-MPS = MPS true or false
true
A contractionary fiscal policy shifts the aggregate demand curve leftward True and false
true
An increase in taxes will shift both the consumption schedule and the saving schedule down True or false
true
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. true or false
true
When the economy is experiencing demand-pull inflation, its real GDP tends to be rising True or false
true
When the economy is experiencing demand-pull inflation, its real GDP tends to be rising true or false
true
If the MPC is 0.75, the multiplier will be: A) 4 B) 3.5 C) 3 D) 2
A
A tax reduction of a specific amount will be more expansionary the: A) smaller is the economy's MPC B) larger is the economy's MPC C) smaller is the economy's multiplier D) less is the economy's built-in stability
B
An increase in productivity will: A) increase aggregate supply and aggregate demand B) increase aggregate supply C) increase aggregate demand D) decrease aggregate supply and aggregate demand
B
The two reasons why bankruptcy is a false concern about the public debt are: A) government spending and taxation B) refinancing and taxation C) investment and refinancing D) saving and investment
B
automatic stabilizers smooth fluctuations in the economy because they produce changes in the government's budget that A) Reinforce changes in GDP B) Help offset changes in GDP C) produce a cyclically-adjusted budget D) Produce a standardized budget
B
A major advantage of the built-in or automatic stabilizers is that they: A) simultaneously stabilize the economy and reduce the absolute size of public debt B) automatically produce surpluses during recessions and deficits durings inflations C) require no legislative action by Congress to be made effective D) guarantee that the federal budget will be balanced over the course of business cycle
C
If the MPC is 0.75, then the multiplier will be: A) 3 B) 2 C) 4 D) 3.5
C
The crowding-out effect suggests that: A) increases in consumption are always at the expense of saving B) increases in government spending will close a recessionary expenditure gap C) Increases in government spending may reduce private investment D) high taxes reduce both consumption and saving
C
The following are important problems associated with the public debt, except: A) payments of interest on the debt lead to greater income inequality B) Interest payments on the debt tend to reduce economic incentives to work and invest C) Government borrowing to finance the debt may lead to too much private investment D) payment of interest on the debt held by foreigners would send real resources abroad
C
A contractionary fiscal policy is shown as a: A) rightward shift in the economy's aggregate demand curve B) rightward shift in the economy's aggregate supply curve C) movement along an existing aggregate demand curve D) leftward shift in the economy's aggregate demand curves
D
An economy declines into recession, the collection of personal income tax revenues automatically falls. This phenomenon best illustrates how a 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) serves as an automatic stabilizer for the economy
D
How is the public debt calculated? A) by subtracting the government's total liabilities from its total assets B) by cumulating the annual government purchases over time C) By subtracting current government spending from current government tax revenues D) by cumulating the annual difference between tax revenues and government spending over the years
D
The economy experiences an increase in the price level and a decrease in the real domestic output. Which of the following is a likely explanation? A) productivity has increased B) government regulations have been reduced C) there has been an increase in government spending D) input prices have increased
D
Which of the following serves as an automatic stabilizer in an economy? A) interest rates B) exchange rates C) the inflation rate D) the progressive income tax
D
fiscal policy is enacted through changes in: A) Interest rates and the price level B) the supply of money and foreign exchange C) unemployment and inflation D) taxation and government spending
D
1-MPC=MPS True or false?
True
1+MPS=MPC true or false
false
If the government wants to reduce unemployment using fiscal policy, it may do so by increasing government spending: true or false
true
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) Degree of excess capacity Which of the above factors best explain the downward slope of aggregate demand curve? A) 2,4 and 6 B) 1,3, and 8 C) 4,6, and 7 D) 7,9, anf 10
B
A decrease in aggregate demand in the short run will reduce: A) the price level and increase the real domestic output B) Both real output and the price level C) the price level and have no effect on real domestic output D) the real domestic output and have no effect on the price level
B
A decrease in consumer spending can be expected to shift the: A) aggregate expenditures curve upward and the aggregate demand curve rightward B) aggregate expenditures curve downward and the aggregate demand curve leftward C) aggregate expenditures curve downward and the aggregate demand curve rightward D) aggregate expenditures curve upward and the aggregate demand curve leftward
B
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 8 percent is greater than the real rate of interest B) Not undertake the investment because the expected rate of return of 4 percent is less than the real rate of interest C) Not undertake the investment because the expected rate of return of 4 percent is less than the real rate of interest D) Undertake the investment because the expected rate of return of 10 percent is greater than the real rate of interest
B
Automatic stabilizers smooth fluctuations in the economy because they produce changes in the government's budget that: A) reinforce changes in GDP B) help offset changes in GDP C) produce a cyclically-adjusted budget D) produce a standardized budget
B
Due to automatic stabilizers, when the nation's total income rises, government transfer spending: A) increases and tax revenues decreases B) decreases and tax revenues increases C) and tax revenues decrease D) and tax revenues increase
B
Generally speaking, the greater the MPS, the: A) Larger would be the increase in income which results from an increase in consumption spending B) Smaller 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
B
If a family's MPC is 0.7, it means that the family is: A) operating at the break even point B) Spending seven-tenths if any increment to its income C) Necessarily dissaving D) Spending 70 percent of its disposable income
B
If real estate rate increases: A) the investment demand curve will shift to the left B) There will be a movement upward along the investment demand curve C) There will be a movement downward along the investment demand curve D) the investment demand curve will shift to the right
B
If there is decrease in disposable income in an economy, then A) both the APC and the APS fall B) the APC rises and the APS falls C) both the APC and the APS rise D) the APC falls and the APS rises
B
A decrease in interest rates caused by a change in price level would cause a: A) decrease (or shift left) in aggregate demand B) increase (or shift right) in aggregate demand C) decrease in quantity of real output demanded (or movement up along the AD) D) increase in the quantity of real output demanded (or movement down along AD)
D
A high rate of inflation is likely to cause a: A) low rate of growth of nominal GDP B) low nominal interest rate C) decrease in nominal wages D) high nominal interest rate
D
An expected increase in the prices of consumer goods in the near future will: A) decrease (or shift left) in aggregate demand now B) decrease in the quantity of real output demanded (or movement up along the AD) C) increase in the quantity of real output demanded (or movement down along the AD) D) Increase ( or shift left) in aggregate demand now
D
Fiscal policy is enacted through changes in: A) interest rates and the price level B) the supply of money and foreign exchange C) unemployment and inflation D) taxation and government spending
D
If consumers expect prices to rise and shortages to occur in the future, then it will shift: A) upward of both the consumption and saving schedules B) of the consumption schedule downward and the saving schedule upward C) Downward of both the consumption and saving schedules D) of the consumption schedule upward and of the saving schedule downward
D
If households in the economy save more of any extra income that they earn, then the multiplier effect will: A) Become less than 1.0 B) Be unaffected C) increase D) decrease
D
If the U.S. dollar appreciates in value relative to foreign currencies, then this will: A) increase aggregate demand and aggregate supply B) decrease aggregate demand and aggregate supply C) Increase aggregate demand and decrease aggregate supply D) decrease aggregate demand and increase aggregate supply
D