Macro

the interest rate.

Firms decide how much to invest by comparing the rate of return on their projects with: the productivity of the workers assigned to the projects. the before-tax rate of return. their total profit. the interest rate.

5,000

If $1,000 of additional spending occurs and the marginal propensity to consume is 0.8, the total effect on the economy is an increase of _____ in income or output. $800 $8,000 $1,000 $5,000

the effect of an increase in government spending on aggregate expenditures is weakened.

If a government always balances its budget: economic growth is spurred by showing businesses that budgets can be balanced. the effect of an increase in government spending on aggregate expenditures is weakened. raising taxes has no net effect on total spending. the economy can never fall into a recession.

less, lowering both employment and income.

If aggregate expenditures equals $7,600 and aggregate income equals $8,000, businesses will produce: less, lowering employment and raising income. more, raising both employment and income. less, lowering both employment and income. more, raising employment and lowering income

0.6

If disposable income is $3,000 and saving is $1,200, how much is the average propensity to consume? 2.5 0.6 0.4 1.2

6.67.

If the marginal propensity to consume is 0.85, the value of the spending multiplier will be: 6.67. 5.1. 0.15. 1.17.

900

If the marginal propensity to consume is 0.9 and income increases from $10,000 to $11,000, by how much does consumption increase? $900 $100 $11,000 $1,000

decreases by $10 billion.

If the multiplier is 2 and investment spending falls by $5 billion, then equilibrium income: decreases by $10 billion. increases by $2.5 billion. decreases by $5 billion. increases by $10 billion.

income

In the Keynesian model, the principal determinant of saving is: tax rates. income. interest rates. investment.

saving is zero.

(Figure: Consumption Spending) At point A in the graph provided: 45 degree angle saving is $20. saving is zero. consumption is zero. consumption exceeds income by $20.

1 minus the marginal propensity to consume.

. The slope of the saving schedule is: the average propensity to save. the average propensity to consume. the marginal propensity to consume. 1 minus the marginal propensity to consume.

actions toward macroeconomic policy grew significantly.

After the acceptance of Keynesian analysis, the government: played a role in setting the interest rate only. reduced its role in the operation of the economy. turned to communism as the only solution to the Great Depression. actions toward macroeconomic policy grew significantly.

$0.1 trillion.

Suppose full employment real GDP is $13 trillion, current real GDP is $13.2 trillion, and the marginal propensity to consume is 0.5. The inflationary gap is: $0.2 trillion. $0.05 trillion. -$0.2 trillion. $0.1 trillion.

disposable income; consumption

The 45-degree line in the Keynesian model represents a set of points where _____ equals _____. saving; investment saving; consumption disposable income; consumption disposable income; saving

AE = Y

The 45-degree line in the Keynesian model represents: AE = Y. AE = G. AE = I. AE = C.

The economy would self-correct.

Which of the following did classical economists believe would happen if the economy experienced a downturn? Interest rates would rise. The economy would self-correct. Prices would rise. The government would fix the inefficiencies.

Consumer uncertainty causes people to save more; consumption falls; equilibrium income and production falls; savings decreases because income is lower

Which of the following illustrates the paradox of thrift? Consumer uncertainty causes people to save more; consumption falls; equilibrium income and production falls; savings decreases because income is lower. As businesses save more, interest rates fall, thus reducing household savings. The government encourages saving by raising interest rates; higher interest rates reduce investment spending, which lowers equilibrium income and causes production to fall; savings decreases because income is lower. Consumer uncertainty causes people to save less; consumption rises; equilibrium income and production falls; savings decrease because income is lower.

The marginal propensity to consume

_____ is the change in consumption associated with a change in income. The marginal propensity to consume The average propensity to save The marginal propensity to save The average propensity to consume