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Multiple Choice Quiz
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1
Macro equilibrium:
A)Always occurs at full employment equilibrium
B)Can be disturbed by changes in aggregate demand or aggregate supply
C)Is at a point where total demand does not equal total supply
D)Can persist even when aggregate demand shifts to the right
2
According to Keynes, the most important influence on consumer spending is:
A)Expectations
B)Interest rates
C)Disposable income
D)Taxes
3
The United States has a high average propensity to consume. This means:
A)The marginal propensity to consume is low
B)The average rate of saving is high
C)Americans consume a large portion of the total disposable income
D)On average the propensity to save is high
4
Disposable income is:
A)The amount of discretionary spending consumers have
B)The total income available to consumers
C)Equal to national income
D)Income after taxes
5
The marginal propensity to consume is equal to:
A)The change in consumer spending divided by the change in disposable income
B)Total consumer spending divided by total income
C)Disposable income divided by consumption
D)The change in disposable income divided by the change in consumption
6
Autonomous consumption is:
A)Not influenced by current income
B)Can be influenced by expectations
C)Can be financed by savings
D)All of the above
7
A consumption function is: C = 500 + .80 Yd. This means:
A)Consumers will save 80 cents out of each additional dollar in disposable income
B)Consumers will spend 500 in addition to current income
C)Consumers will spend 500 out of current income
D)The marginal propensity to consume is .20
8
The marginal propensity to save is:
A)The total amount of savings out of total income
B)The propensity that consumers have for spending
C)Equal to 1 - MPC
D)Always equal to $1.00
9
Aggregate demand will shift to the right if consumers:
A)Have a negative decline in wealth
B)Are more confident about the economic future
C)Receive a tax increase
D)Consumers are heavily in debt and pull back their spending
10
A fall in consumer spending:
A)Can cause macro instability
B)Is not likely to cause macro instability
C)Cannot be offset by an increase in investment spending
D)Is always due to a fall in income
11
Which of the following is not an influence on investment spending?
A)Expectations
B)Technology and innovation
C)Wealth
D)Interest rates
12
Changes in business investment spending:
A)Are not a source of macro instability
B)Are frequent and are a major source of macro instability
C)Did not occur after September 11th 2001
D)Are rarely caused by changes in expectations
13
Macro failure is defined as:
A)When the market fails to produce goods and services
B)When aggregate supply does not intersect aggregate demand
C)When equilibrium real GDP is less or greater than full employment
D)When aggregate demand equals aggregate supply
14
In a recessionary gap:
A)The equilibrium real GDP is above full employment real GDP
B)Cyclical unemployment is falling
C)Aggregate demand does not equal aggregate supply
D)Equilibrium real GDP is less than full employment real GDP
15
According to Keynes, the economy can be in macro failure if:
A)Aggregate demand is too little to produce full employment
B)Aggregate demand is too much and an inflationary gap results
C)Aggregate demand is too unstable to produce price stability and full employment
D)All of the above





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