Question 1

-In the above figure, the sum of real planned investment spending, government expenditures, and net export spending is equal to

Accepted Answer

A)   $0.5 trillion.
B)   $1.0 trillion.
C)   $1.5 trillion.
D)   $2.0 trillion.E) B) and C)
F) None of the above

Question 2

If the average propensity to consume is 1.0, the marginal propensity to consume is 0.6, and real disposable income increases by $100, the additional saving is

Accepted Answer

A)   $0.
B)   $40.
C)   $60.
D)   $100.E) A) and B)
F) None of the above

Question 3

According to the above figure, autonomous consumption equals

Accepted Answer

A)   $0.
B)   $5,000.
C)   $20,000.
D)   -$5,000.E) A) and D)
F) B) and C)

Question 4

The relationship between planned real investment spending and the interest rate is

Accepted Answer

A)   inverse.
B)   direct.
C)   constant.
D)   positive.E) None of the above
F) A) and B)

Question 5

Which of the following is TRUE?

Accepted Answer

A)   APC + MPS = 1
B)   APC + APS = 1
C)   1 + APC = APS
D)   APC - APS = 1E) B) and C)
F) A) and B)

Question 6

-In the above figure, what is the equilibrium level of real GDP with government and the foreign sector?

Accepted Answer

A)   $2.0 trillion
B)   $2.5 trillion
C)   $3.0 trillion
D)   $4.0 trillionE) C) and D)
F) A) and B)

Question 7

Real planned investment spending is positively related to all of the following EXCEPT

Accepted Answer

A)   real disposable income.
B)   wealth.
C)   the interest rate.
D)   producer expectations of future profit.E) B) and C)
F) None of the above

Question 8

-Consider the above figure. At income level Yd = $110, the APS is equal to

Accepted Answer

A)   0.64.
B)   0.32
C)   1.10.
D)   -0.36.E) None of the above
F) B) and D)

Question 9

If the marginal propensity to save is 0.4 and disposable income decreases from $2,000 to $1,000, saving will

Accepted Answer

A)   decrease by $400.
B)   increase by $400.
C)   decrease by $80.
D)   increase by $80E) B) and D)
F) B) and C)

Question 10

Real consumption is a function of real disposable income, but the simple Keynesian model uses real GDP instead of real disposable income. This is appropriate since

Accepted Answer

A)   real disposable income tends to move proportionately with real GDP.
B)   real disposable income is a fixed percentage of real GDP.
C)   real GDP is a fixed percentage of real disposable income.
D)   we cannot measure either exactly and the purpose of the exercise is theoretical only.E) B) and D)
F) C) and D)

Question 11

Investment spending is

Accepted Answer

A)   directly related to the interest rate.
B)   inversely related to the interest rate.
C)   directly related to real disposable income.
D)   inversely related to real disposable income.E) B) and C)
F) All of the above

Question 12

The investment function will shift when there is a change in

Accepted Answer

A)   the interest rate.
B)   firms' profit expectations.
C)   the cost of borrowing.
D)   the opportunity cost of retained earnings.E) A) and B)
F) B) and C)

Question 13

-Refer to the above figure. The figure represents the consumption function for a consumer. Point B represents

Accepted Answer

A)   autonomous consumption.
B)   positive saving.
C)   negative saving.
D)   zero saving.E) A) and B)
F) None of the above

Question 14

Keynesian theory is based on the hypothesis that

Accepted Answer

A)   saving is influenced primarily by real current disposable income.
B)   saving is influenced primarily by the interest rate.
C)   planned savings equal planned investment only at full employment.
D)   saving is always equal to savings.E) All of the above
F) A) and C)

Question 15

Which of the following statements is TRUE?

Accepted Answer

A)   consumption + saving = disposable income
B)   consumption + saving = personal income
C)   consumption - investment = disposable income
D)   consumption - saving = personal incomeE) All of the above
F) C) and D)

Question 16

If the marginal propensity to save (MPS)  is 0.25, the multiplier will be

Accepted Answer

A)   0.75.
B)   2.5.
C)   4.
D)   40.E) A) and B)
F) A) and C)

Question 17

The terms "saving" and "savings" differ in that

Accepted Answer

A)   saving is a stock, and savings are a flow.
B)   saving always exceeds savings.
C)   savings are a stock, and saving is a flow.
D)   savings can be negative, but saving cannot.E) All of the above
F) A) and B)

Question 18

The average propensity to save (APS)  is

Accepted Answer

A)   the rate at which real savings changes over time.
B)   the percentage of real disposable income saved.
C)   the difference between the amounts of real disposable income consumed and saved.
D)   the percentage of additional real disposable income that will go toward real saving.E) B) and C)
F) A) and B)

Question 19

-Consider the above figure. The equation for the saving function is

Accepted Answer

A)   S = 40 - 0.67Yd.
B)   S = 40 + 0.33Yd.
C)   S = -40 + 0.67Yd.
D)   S = -40 - 0.33Yd.E) All of the above
F) A) and D)

Question 20

According to Keynes, the most important determinant of an individual's real saving is

Accepted Answer

A)   interest rates.
B)   the foreign exchange rate.
C)   the individual's real disposable income.
D)   the level of investment.E) C) and D)
F) None of the above

Exam 12: Consumption, Real GDP, and the Multiplier

The average propensity to save (APS) is

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-In the above figure, what is the equilibrium level of real GDP with government and the foreign sector?

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-Refer to the above figure. The figure represents the consumption function for a consumer. Point B represents

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If the marginal propensity to save is 0.4 and disposable income decreases from $2,000 to $1,000, saving will

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Real consumption is a function of real disposable income, but the simple Keynesian model uses real GDP instead of real disposable income. This is appropriate since

Correct AnswerverifiedShow Answer

Which of the following is TRUE?

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If the average propensity to consume is 1.0, the marginal propensity to consume is 0.6, and real disposable income increases by $100, the additional saving is

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The relationship between planned real investment spending and the interest rate is

Correct AnswerverifiedShow Answer

-In the above figure, the sum of real planned investment spending, government expenditures, and net export spending is equal to

Correct AnswerverifiedShow Answer

According to the above figure, autonomous consumption equals

Correct AnswerverifiedShow Answer

Keynesian theory is based on the hypothesis that

Correct AnswerverifiedShow Answer

-Consider the above figure. At income level Yd = $110, the APS is equal to

Correct AnswerverifiedShow Answer

The investment function will shift when there is a change in

Correct AnswerverifiedShow Answer

The terms "saving" and "savings" differ in that

Correct AnswerverifiedShow Answer

Which of the following statements is TRUE?

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According to Keynes, the most important determinant of an individual's real saving is

Correct AnswerverifiedShow Answer

Real planned investment spending is positively related to all of the following EXCEPT

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-Consider the above figure. The equation for the saving function is

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Investment spending is

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If the marginal propensity to save (MPS) is 0.25, the multiplier will be

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