Macro exam 2

If the value of the MPC is 0.6 and real GDP falls by $25, this was caused by a decrease in initial spending of

$10

Assume that MPS is 0.4. If spending increases by $8 billion, then real GDP will increase by:

$20 billion

GDP C 140 150 180 180 220 210 260 240 300 270 Refer to the data. If gross investment is $10 at all levels of GDP, the equilibrium GDP will be:

$220.

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:

$305.

Assume the MPC is .8. If government were to impose $50 billion of new taxes on household income, consumption spending would initially decrease by:

$40 billion.

Disposable income Consumption 300 310 350 340 400 370 450 400 500 430 Refer to the data above. If disposable income is $550, we would expect consumption to be:

$460

Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume is .5. Aggregate expenditures must have increased by:

$50 billion.

Disposable income Consumption 0 8 80 80 160 152 240 224 320 296 400 368 Refer to the data above. At the $320 billion level of disposable income, the average propensity to save is:

.075

Disposable income Consumption 0 8 80 80 160 152 240 224 320 296 400 368 Refer to the data above. The marginal propensity to save in this economy is:

.1

Disposable Income Consumption 200 205 225 225 250 245 275 265 300 285 Refer to the given data. The marginal propensity to consume is:

.80

Disposable income Consumption 0 8 80 80 160 152 240 224 320 296 400 368 Refer to the data above. If plotted on a graph, the slope of the consumption schedule would be:

.9

If C spending increases from $358 to $367 when DI increases from $412 to $427, it can be concluded that the MPC is

0.6

If, in an economy, a $200 billion increase in consumption spending creates $200 billion of new income in the first round of the multiplier process and $160 billion in the second round, the marginal propensity to consume and the multiplier are, respectively:

0.8 and 5.0

With a marginal propensity to save of .4, the marginal propensity to consume will be:

1.0 minus .4.

As disposable income goes up, the:

average propensity to consume falls.

In a private closed economy, when aggregate expenditures exceed GDP:

business inventories will fall.

Dissaving occurs where:

consumption exceeds income.

In a simple economy, if real GDP is $275, C is $250 and I is $30, real GDP

will tend to increase

If a lump-sum income tax of $25 billion is levied and the MPS is .20, the:

consumption schedule will shift downward by $20 billion.

Higher real rates of interest are likely to

decrease C and increase S

A decline in disposable income:

decreases consumption by moving downward along a specific consumption schedule

Disposable Income Consumption 200 205 225 225 250 245 275 265 300 285 Refer to the given data. At the $200 level of disposable income:

dissaving is $5.

In the aggregate expenditures model, it is assumed that investment:

does not change when real GDP changes.

When the economy's real GDP exceeds its equilibrium real GDP,

there is unplanned I

If in an economy a $150 increase in I creates a $150 of new income in the first round of the multiplier process and $105 in the second round, the multiplier and the MPC will be, respectively,

3.33 and 0.7

If there was a change in investment spending of $10 and the MPS was 0.25, then real GDP would increase by

40

Suppose a family's consumption exceeds its disposable income. This means that its:

APC is greater than 1.

As DI increases

Both C and S decrease

Saving equals

DI minus C

GDP C 140 150 180 180 220 210 260 240 300 270 Refer to the data. If a lump-sum tax of $20 is imposed, the consumption schedule will become:

GDP C 145 135 180 165 220 195 260 225 300 255

Which relationship is an inverse one?

I and rate of interest

Assume the marginal propensity to consume is 0.8. If consumer spending increases by $20 billion, then real GDP will:

Increase by $100 billion

If the consumption schedule is a straight line, it can be concluded that the:

MPC is constant at various levels of income

Assume that an increase in a household's disposable income from $40,000 to $48,000 leads to an increase in consumption from $35,000 to $41,000, then the:

Slope of the consumption schedule is .75

Assume that in a private closed economy consumption is $240 billion and investment is $50 billion, both at the $280 billion level of domestic output. Thus:

unplanned decreases in inventories of $10 billion will occur.

If DI is $375 when the APC is 0.8, it can be concluded that

S is $75

If disposable income is $900 billion when the average propensity to consume is 0.9, it can be concluded that:

Saving is $90 billion

An increase in wealth shifts the C-schedule

upward and the S-schedule downward

Other things equal, if a change in the tastes of American consumers causes them to purchase more foreign goods at each level of U.S. GDP, then:

U.S. real GDP will fall.

A $1 increase in government spending on goods and services will have a greater impact on the equilibrium GDP than will a $1 decline in taxes because:

a portion of a tax cut will be saved.

Households tend to spend a larger portion of

a small DI than a large DI

A decrease in investment demand would be a consequence of a decline in

expected future sales

If the multiplier in an economy is 5, a $20 billion increase in net exports will:

increase GDP by $100 billion.

If the MPC is .70 and investment increases by $3 billion, the equilibrium GDP will:

increase by $10 billion.

MPC is 0.67 and initial spending increases by $25, real GDP will

increase by $25

If 100 percent of any change in income is spent, the multiplier will be:

infinitely large.

Which is an injection?

investment

The relationship between the real interest rate and investment is shown by the:

investment demand schedule.

The size of the multiplier is equal to the:

reciprocal of the slope of the saving schedule.

If Trent's MPC is .80, this means that he will:

spend eight-tenths of any increase in his disposable income.

In a mixed closed economy:

taxes and savings are leakages, while investment and government purchases are injections.

The investment demand curve will shift to the right as a result of:

technological progress.

As the DI increases

the APC falls and the APS rises

The consumption schedule is such that:

the MPC is constant and the APC declines as income rises