question
the marginal propensity to consume is:
a- increasing if the marginal propensity to save is increasing
b- the proportion of total income that the average family invests
c- the change in consumer spending divided by the change in aggregate disposable income
d- the change in consumer spending less the change in aggregate disposable income
e- equal to 1
a- increasing if the marginal propensity to save is increasing
b- the proportion of total income that the average family invests
c- the change in consumer spending divided by the change in aggregate disposable income
d- the change in consumer spending less the change in aggregate disposable income
e- equal to 1
answer
c
question
the MPS plus the MPC must equal-
a- zero
b- one
c- total income
d- saving
e- disposable income
a- zero
b- one
c- total income
d- saving
e- disposable income
answer
b
question
the marginal propensity to save is:
a- savings divided by aggregate income
b- the fraction of an additional dollar of disposable income that is saved
c- 1 +MPC
d- 1/MPC
e- equal to 1
a- savings divided by aggregate income
b- the fraction of an additional dollar of disposable income that is saved
c- 1 +MPC
d- 1/MPC
e- equal to 1
answer
b
question
the multiplier is equal to:
a- 1/(1-MPC)
b- MPS/MPC
c- 1/(MPC)
d- 1/ (1+MPC)
e- 1/ (1-MPS)
a- 1/(1-MPC)
b- MPS/MPC
c- 1/(MPC)
d- 1/ (1+MPC)
e- 1/ (1-MPS)
answer
a
question
if disposable income increases by $5 billion and consumer spending increases by $4 billion, the marginal propensity to consume is equal to:
a- 20
b- .8
c- 1.25
d- 9
e- .2
a- 20
b- .8
c- 1.25
d- 9
e- .2
answer
b
question
the slope of the consumption function is called the:
a- marginal propensity to save
b- average propensity to consume
c- marginal propensity to consume
d- marginal propensity to invest
e- average propensity to save
a- marginal propensity to save
b- average propensity to consume
c- marginal propensity to consume
d- marginal propensity to invest
e- average propensity to save
answer
c
question
if MPC= .9, the multiplier is:
a- 10
b- 90
c- 9
d- 1
e- 5
a- 10
b- 90
c- 9
d- 1
e- 5
answer
a
question
suppose the government increases its spending by $100 billion as a stimulus package. if the MPC is .6, then equilibrium income will:
a- decrease by $250 billion
b- increase by $250 billion
c- increase by $600 billion
d- decrease by $400 billion
e- increase by $400 billion
a- decrease by $250 billion
b- increase by $250 billion
c- increase by $600 billion
d- decrease by $400 billion
e- increase by $400 billion
answer
b
question
the most important factor affecting a household's consumer spending is:
a- its EXPECTED future disposable income
b- its current disposable income
c- its wealth
d- the current interest rate
e- the current tax rate
a- its EXPECTED future disposable income
b- its current disposable income
c- its wealth
d- the current interest rate
e- the current tax rate
answer
a
question
the modern tools of macroeconomic policy are:
a- tax policy and antitrust policy
b- fiscal policy and monetary policy
c- monetary policy and exchange rate policy
d- capital policy and labor policy
e- fiscal policy and trade policy
a- tax policy and antitrust policy
b- fiscal policy and monetary policy
c- monetary policy and exchange rate policy
d- capital policy and labor policy
e- fiscal policy and trade policy
answer
b
question
the aggregate demand curve shows the relationship between the aggregate price level and:
a- aggregate productivity
b- the aggregate unemployment rate
c- the aggregate quantity of output demanded by households, businesses, the government, and the rest of the world
d- the aggregate quantity of output demanded by businesses only
e- the aggregate quantity of goods and services consumed by households
a- aggregate productivity
b- the aggregate unemployment rate
c- the aggregate quantity of output demanded by households, businesses, the government, and the rest of the world
d- the aggregate quantity of output demanded by businesses only
e- the aggregate quantity of goods and services consumed by households
answer
c
question
according to the wealth effect, when the price level decreases, the purchasing power of assets:
a- decreases and consumer spending decreases
b- increases and consumer spending decreases
c- decreases and consumer spending increases
d- remains constant and consumer spending is unchanged
e- increases and consumer spending increases
a- decreases and consumer spending decreases
b- increases and consumer spending decreases
c- decreases and consumer spending increases
d- remains constant and consumer spending is unchanged
e- increases and consumer spending increases
answer
e
question
suppose that the stock market crashes. which of the following is most likely to occur?
a- the aggregate demand curve shifts to the right
b- the aggregate demand curve shifts to the left
c- a movement up the aggregate demand curve
d- a movement down the aggregate demand curve
e- a movement down the aggregate demand curve, coupled with a shift to the left
a- the aggregate demand curve shifts to the right
b- the aggregate demand curve shifts to the left
c- a movement up the aggregate demand curve
d- a movement down the aggregate demand curve
e- a movement down the aggregate demand curve, coupled with a shift to the left
answer
b
question
an increase in government spending on health care is likely to shift the:
a- short run aggregate supply curve to the right
b-short run aggregate supply curve to the left
c- long run aggregate supply curve to the left
d- aggregate demand curve to the left
e- aggregate demand curve to the right
a- short run aggregate supply curve to the right
b-short run aggregate supply curve to the left
c- long run aggregate supply curve to the left
d- aggregate demand curve to the left
e- aggregate demand curve to the right
answer
e
question
raising income taxes shifts the:
a- aggregate demand curve to the left
b- long run aggregate supply curve to the left
c- aggregate demand curve to the right
d- short run aggregate supply curve to the left
e- short run aggregate supply curve to the right
a- aggregate demand curve to the left
b- long run aggregate supply curve to the left
c- aggregate demand curve to the right
d- short run aggregate supply curve to the left
e- short run aggregate supply curve to the right
answer
a
question
increasing the quantity of money in circulation shifts the:
a- aggregate demand curve to the left
b- long run aggregate supply curve to the right
c- aggregate demand curve to the right
d- short run aggregate supply to the right
e- short run aggregate supply to the left
a- aggregate demand curve to the left
b- long run aggregate supply curve to the right
c- aggregate demand curve to the right
d- short run aggregate supply to the right
e- short run aggregate supply to the left
answer
c
question
according to the short run aggregate supply curve, when the ______ rises, the quantity of ____________ rises
a- profit per unit, aggregate output demanded
b- interest rate, investment
c- aggregate price level, aggregate output demanded
d- interest rate, aggregate output supplied
e- aggregate price level, aggregate output supplied
a- profit per unit, aggregate output demanded
b- interest rate, investment
c- aggregate price level, aggregate output demanded
d- interest rate, aggregate output supplied
e- aggregate price level, aggregate output supplied
answer
e
question
which of the following would cause a shift in the short run aggregate supply curve
a- the quantity of real output supplied
b- the price level
c- a change in commodity prices
d- changes in aggregate demand
e- changes to government transfer payments
a- the quantity of real output supplied
b- the price level
c- a change in commodity prices
d- changes in aggregate demand
e- changes to government transfer payments
answer
c
question
a rise in labor productivity is most likely to result in :
a- an increase in aggregate demand
b- a decrease in aggregate demand
c- a decrease in short run aggregate supply
d- a decrease in long run aggregate supply
e- an increase in short run aggregate supply
a- an increase in aggregate demand
b- a decrease in aggregate demand
c- a decrease in short run aggregate supply
d- a decrease in long run aggregate supply
e- an increase in short run aggregate supply
answer
e
question
a general decrease in wages will result in:
a- aggregate demand shifting to the right
b- aggregate demand shifting to the left
c- short run aggregate supply shifting to the right
d- short run aggregate supply shifting to the left
e- long run aggregate supply shifting to the right
a- aggregate demand shifting to the right
b- aggregate demand shifting to the left
c- short run aggregate supply shifting to the right
d- short run aggregate supply shifting to the left
e- long run aggregate supply shifting to the right
answer
c
question
in the long run, the aggregate price level has:
a- no effect on the quantity of aggregate output
b- a positive effect on the quantity of aggregate output
c- a negative effect on the quantity of aggregate output
c- a negative effect on the quantity of aggregate output
d- a positive impact on aggregate output, but no impact on employment
e- a positive impact on employment, but no impact on aggregate output
a- no effect on the quantity of aggregate output
b- a positive effect on the quantity of aggregate output
c- a negative effect on the quantity of aggregate output
c- a negative effect on the quantity of aggregate output
d- a positive impact on aggregate output, but no impact on employment
e- a positive impact on employment, but no impact on aggregate output
answer
a
question
a nation's potential output:
a- is the level of output that the economy would produce if all prices, including nominal wages, were fully flexible.
b- varies with the price level
c- is dependent on the level of consumer confidence
d-is greater in periods of expansions than in recessions
e- is the level of output the economy would produce if there was no unemployment
a- is the level of output that the economy would produce if all prices, including nominal wages, were fully flexible.
b- varies with the price level
c- is dependent on the level of consumer confidence
d-is greater in periods of expansions than in recessions
e- is the level of output the economy would produce if there was no unemployment
answer
a
question
fiscal policy refers to:
a- the manipulation of interest rates
b- the manipulation of government spending and taxations
c- the manipulation of the quantity of money
d- the manipulation of interest rates and of government spending
e- the manipulation of imports and exports
a- the manipulation of interest rates
b- the manipulation of government spending and taxations
c- the manipulation of the quantity of money
d- the manipulation of interest rates and of government spending
e- the manipulation of imports and exports
answer
b
question
medicaid, medicare, and social security are examples of:
a- unilateral payments
b- transfer payments
c- monetary policy
d- income taxes
e- monetary policy
a- unilateral payments
b- transfer payments
c- monetary policy
d- income taxes
e- monetary policy
answer
b
question
suppose the economy is experiencing a recessionary gap. to move equilibrium aggregate output closer to the level of potential output, the best fiscal policy option is to:
a- decrease government purchases
b- decrease taxes
c- decrease government transfers
d- increase real interest rates
e- increase the money supply
a- decrease government purchases
b- decrease taxes
c- decrease government transfers
d- increase real interest rates
e- increase the money supply
answer
b
question
the multiplier effect of changes in government purchases of goods and services is equal to:
a- 1/(1-MPS)
b- 1/(1-MPC)
c- MPS (1-MPC)
d- MPC (1-MPS)
e- MPS/MPC
a- 1/(1-MPS)
b- 1/(1-MPC)
c- MPS (1-MPC)
d- MPC (1-MPS)
e- MPS/MPC
answer
B
question
if the government decides to spend an extra $5 billion:
a- GDP will increase by $5 billion
b- GDP will remain unchanged
c- GDP will increase by less than $5 billion
d- GDP will increase by more than $5 billion
e- GDP will decrease by more than $5 billion
a- GDP will increase by $5 billion
b- GDP will remain unchanged
c- GDP will increase by less than $5 billion
d- GDP will increase by more than $5 billion
e- GDP will decrease by more than $5 billion
answer
d
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