AP eco chapters 9-10
1. The most important determinant of consumer spending is... A) the level of income B) the level of household debt C) consumer expectations D) the stock of wealth
A
10. Refer to the above diagram. The economy is dissaving: A) at income level H. B) at all income levels greater than E. C) at income level E. D) in the amount CD.
A
16. Refer to the above diagram for a private closed economy. The $400 level of GDP is: A) unstable because aggregate expenditures are less than GDP. B) too high because consumption exceeds investment. C) unstable because aggregate expenditures exceed GDP. D) that output at which saving is zero.
A
18. The practical significance of the multiplier is that it: A) magnifies relatively small initial changes in spending into larger changes in GDP. B) helps to stabilize the economy. C) brings about an equality of planned investment and saving. D) keeps inflation within tolerable limits.
A
23. An "inflationary gap" is the amount by which: A) aggregate expenditures exceed the full-employment level of domestic output. B) saving exceeds investment at the full-employment GDP. C) aggregate expenditures exceed any given level of domestic output. D) equilibrium GDP falls short of the full-employment GDP.
A
24. A "recessionary gap" is: A) the amount by which the full-employment GDP exceeds the level of aggregate expenditures. B) the amount by which aggregate expenditures exceed the full-employment level of domestic output. C) the amount by which equilibrium GDP falls short of the full-employment GDP. D) the amount by which investment exceeds saving at the full-employment GDP.
A
25. Refer to the above diagram. If the full-employment level of GDP is B and aggregate expenditures are at AE2, the: A) economy is in equilibrium, at full employment. B) inflationary gap is ed. C) recessionary gap is BC. D) inflationary gap is eg.
A
7. At the point where the consumption schedule intersects the 45-degree line: A) the APC is 1.00. Page 6 B) the economy is in equilibrium. C) the MPC is 1.00. D) saving is equal to consumption.
A
9. Refer to the above diagram. Consumption will be equal to income at: A) an income of E. B) an income of F. C) point D. D) point C.
A
12. In the aggregate expenditures model, it is assumed that investment: A) changes by less in percentage terms than changes in the level of real GDP. B) does not change when the level of real GDP changes. C) automatically changes in response to changes in the current level of real GDP. D) does not respond to changes in interest rates.
B
15. Refer to the above diagram for a private closed economy. At the equilibrium level of GDP, investment and saving are both: A) $40. B) $50. C) $100. D) $20.
B
17. The multiplier is useful in determining the: A) full-employment unemployment rate B) change in equilibrium GDP resulting from a change in spending C) level of business inventories D) rate of inflation
B
19. In a mixed open economy the equilibrium level of GDP exists where: A) Ca + Ig + Xn = Sa + T . B) Ca + Ig + Xn + G = GDP. C) Ca + Ig = Sa + T + X . D) Ca + Ig + Xn intersects the 45-degree line.
B
4. A decline in disposable income: A) increases consumption because it shifts the consumption schedule upward. B) decreases consumption by moving downward along a specific consumption schedule. C) decreases consumption because it shifts the consumption schedule downward. D) increases consumption by moving upward along a specific consumption schedule.
B
6. Refer to the above data. The MPC is: A) .50. B) .20. C) .90. D) .45.
C
8. The wealth effect is shown graphically as a: A) movement along an existing investment schedule. B) shift of the investment schedule. C) movement along an existing consumption schedule. D) shift of the consumption schedule.
D
5. The MPC for an economy is: A) the slope of the savings schedule or line. B) 1 divided by the slope of the savings schedule or line. C) 1 divided by the slope of the consumption schedule or line. D) the slope of the consumption schedule or line.
D
11. The immediate determinants of investment spending are the: A) interest rate and the expected price level. B) level of saving and the real interest rate. C) marginal propensity to consume and the real interest rate. Page 19 D) expected rate of return on capital goods and the real interest rate.
D
13. The level of aggregate expenditures in the private closed economy is determined by the: A) intersection of the saving schedule and the 45-degree line. B) intersection of the saving and consumption schedules. C) equality of the MPC and MPS. D) expenditures of consumers and businesses.
D
14. Refer to the above diagram for a private closed economy. The equilibrium level of GDP is: A) $400. B) $200. C) $100. D) $300.
D
2. The MPC can be defined as that fraction of a... A) given total income that is not consumed B) given total income that is consumed C) change in income that is not spent D) change in income that is spent
D
20. Refer to the above diagram. The level of government spending: A) varies directly with the level of GDP. B) varies inversely with the level of GDP. C) is equal to tax collections at each level of GDP. D) is the same at all levels of GDP.
D
21. Other things equal, the multiplier effect associated with a change in government spending is: A) less than that associated with a change in investment. B) the same as that associated with a change in taxes. C) greater than that associated with a change in investment. D) equal to that associated with a change in investment or consumption.
D
22. A lump-sum tax means that: A) tax revenues vary inversely with GDP. B) the tax only applies to one time period. C) tax revenues vary directly with GDP. D) the same amount of tax revenue is collected at each level of GDP.
D
3. The consumption schedule relates... A) consumption to saving B) saving to the level of disposable income C) disposable income to domestic income D) consumption to the level of disposable income
D
