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| 1 | |
The consumption schedule is: |
| | A) | an inverse relationship between consumption and the price level |
| | B) | a direct relationship between consumption and disposable income |
| | C) | an inverse relationship between consumption and saving |
| | D) | an inverse relationship between consumption and the tax rate |
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| 2 | |
A household's disposable income increases from $50,000 to $60,000 and its consumption increases from $45,000 to $52,000. Consequently, we can conclude: |
| | A) | the MPC is $7000 |
| | B) | the slope of the consumption schedule is .9 |
| | C) | the MPS is .3 |
| | D) | the consumption schedule must have shifted upwards |
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| 3 | |
Along a particular saving schedule, each change in disposable income of $15 billion generates an additional $3 billion in saving. Therefore: |
| | A) | the MPS is .3 |
| | B) | the MPS is .2 |
| | C) | the APC is .8 |
| | D) | the slope of the consumption schedule is .7 |
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| 4 | |
Following the stock market collapse of 2000, there was a significant drop in the value of household wealth. As a result of the wealth effect: |
| | A) | the saving schedule shifted upward |
| | B) | the consumption schedule shifted upward |
| | C) | the marginal propensity to save increased |
| | D) | the marginal propensity to consume increased |
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| 5 | |
Answer the next question on the basis of the following data:
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| | A) | the MPC and the APC stay the same at every level of income |
| | B) | the MPC remains the same but the APC is higher at every level of income |
| | C) | the MPC and the APC are both higher at every level of income |
| | D) | the APC remains the same but the MPC is higher at every level of income |
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| 6 | |
Immediately prior to the second Iraq war in 2003, there was a drop in both consumer and firm optimism about the future of the economy. This change likely: |
| | A) | shifted the consumption schedule down and caused a movement up and to the left along the investment demand curve |
| | B) | shifted the consumption schedule down and shifted the investment demand curve to the left |
| | C) | shifted the investment demand curve to the left and caused a movement down and to the left along the consumption schedule |
| | D) | caused a movement down and to the left along the consumption schedule and a movement up and to the left along the investment demand curve |
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| 7 | |
In general, the greater the MPS: |
| | A) | the steeper the consumption schedule |
| | B) | the lower the multiplier |
| | C) | the greater the change in GDP for any given initial change in spending |
| | D) | the greater the APC |
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| 8 | |
The higher the expected real rate of return on investments, the more investment is likely to occur. |
| | A) | True |
| | B) | False |
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| 9 | |
If an initial $20 billion dollar increase in investment spending creates $15 billion of new spending in the second round, the multiplier is: |
| | A) | 2 |
| | B) | 3 |
| | C) | 4 |
| | D) | 5 |
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| 10 | |
The value of the multiplier will increase if: |
| | A) | the APC decreases |
| | B) | the MPC decreases |
| | C) | the consumption schedule shifts upward parallel to itself |
| | D) | the MPS decreases |
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