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1 | |
If the MPC for the economy is 0.8: |
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| | A) | The MPS is 1/0.8 |
| | B) | The multiplier is 5 |
| | C) | The multiplier is undefined |
| | D) | The MPS is 0.4 |
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2 | |
The relationship between household spending and the household income is the: |
|
| | A) | Consumption function |
| | B) | Savings function |
| | C) | Investment function |
| | D) | Aggregate demand function |
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3 | |
When studying aggregate consumption, the marginal propensity to consume describes: |
|
| | A) | The additional consumption that results when aggregate demand increases. |
| | B) | The change in consumption expenditures that results when income rises by an additional pound. |
| | C) | The percentage of the typical income pound that is consumed as opposed to being saved. |
| | D) | The amount of an extra pound of income that is saved. |
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4 | |
As used in economics, the 45 degree line: |
|
| | A) | Shows various equilibrium combinations of total spending and income equality. |
| | B) | Contains only a consumption component. |
| | C) | Represents consumption plus planned investment. |
| | D) | Shows those income levels where the marginal propensity to save is 1. |
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5 | |
One of the early signs that an economy should increase its level of aggregate output is generally: |
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| | A) | The willingness of firms to increase their level of investment in plant and equipment. |
| | B) | A reduction in the overall price level. |
| | C) | A surplus of consumer goods on the market. |
| | D) | An unplanned reduction in business inventories. |
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6 | |
The multiplier effect suggests that: |
|
| | A) | Given a change in total spending, equilibrium income will rise by an amount equal to the change in total spending. |
| | B) | A given change in total spending will change saving by an amount equal to the MPS times the change in total spending. |
| | C) | Given a change in total spending, investment spending will change by some multiple of the change in spending. |
| | D) | Given a change in total spending, equilibrium income will change by a multiple of the change in total spending. |
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7 | |
The arithmetic value of 1 - MPC equals: |
|
| | A) | The marginal propensity to invest |
| | B) | The investment multiplier |
| | C) | The marginal propensity to save |
| | D) | The marginal propensity to tax |
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8 | |
One of the important underlying tenets of the balanced budget multiplier model is that: |
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| | A) | A change in taxes by the government causes households to change the composition of stock of wealth and will not affect aggregate demand. |
| | B) | An equal increase in government spending and taxes will result in an increase in equilibrium national income. |
| | C) | A change in fiscal policy changes aggregate demand and this causes a multiple change in aggregate income and output. |
| | D) | Any increase in government spending and taxes will have essentially no effect on aggregate employment and income. |
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9 | |
All of the following would be included in a list of the government's automatic stabilisers except: |
|
| | A) | Unemployment compensation |
| | B) | Education opportunity grants for low income households |
| | C) | Personal income taxes |
| | D) | Taxes on business income |
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10 | |
To say government purchases and taxes are autonomous means that: |
|
| | A) | They are interrelated |
| | B) | Both are determined independently of national income |
| | C) | Taxes determine how much government can spend |
| | D) | Government spending determines the level of taxes |
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11 | |
The money supply is equal to the notes and coins in circulation. |
|
| | A) | TRUE |
| | B) | FALSE |
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12 | |
As the interest rate rises, individuals demand more real money balances. |
|
| | A) | TRUE |
| | B) | FALSE |
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13 | |
Crowding out is more likely to occur when aggregate supply is perfectly elastic. |
|
| | A) | TRUE |
| | B) | FALSE |
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14 | |
Money reduces the need for a double coincidence of wants. |
|
| | A) | TRUE |
| | B) | FALSE |
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15 | |
Credit creation is reduced as more money is paid into banks. |
|
| | A) | TRUE |
| | B) | FALSE |
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16 | |
Money held because payments and receipts are miss-timed is known as the _______. |
|
| | A) | Precautionary Motive |
| | B) | Asset Motive |
| | C) | Transaction Motive |
| | D) | Maximising Motive |
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17 | |
In an open economy with a government sector the multiplier is 1 / (MPS + MPT + ________). |
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| | A) | MPC |
| | B) | MPI |
| | C) | MPX |
| | D) | MPZ |
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18 | |
The supply of money is determined by the demand for money at the equilibrium _______. |
|
| | A) | Inflation rate |
| | B) | Interest rate |
| | C) | Income Level |
| | D) | Price |
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19 | |
An increase in tax rates will ________ the __________. |
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| | A) | Increase, multiplier |
| | B) | Decrease, multiplier |
| | C) | Increase, GDP |
| | D) | Decrease, budget deficit |
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20 | |
If the central bank targets inflation rates, an expansion of fiscal policy will be offset by an increase in __________. |
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| | A) | Money supply |
| | B) | Taxation |
| | C) | Government spending |
| | D) | Interest rates |