Question 1

Dissaving occurs where

Accepted Answer

A)  income exceeds consumption.
B)  saving exceeds consumption.
C)  consumption exceeds income.
D)  saving exceeds income.E) A) and D)
F) B) and D)

Question 2

The so-called wealth effect will result in households

Accepted Answer

A)  spending more and saving less.
B)  spending less and saving more.
C)  spending less and saving less.
D)  spending more and saving more.E) A) and B)
F) A) and C)

Question 3

Which one of the following will cause a movement up along an economy's saving schedule?

Accepted Answer

A)  an increase in household borrowing
B)  an increase in disposable income
C)  an increase in stock prices
D)  an increase in interest ratesE) None of the above
F) B) and D)

Question 4

If households do not spend any extra income they receive but instead save the entire extra amount, then the multiplier will be zero.

Accepted Answer

A) True 
 B)False

Question 5

A $1 billion increase in investment will cause a

Accepted Answer

A)  (1/MPS)  billion increase in GDP.
B)  (MPS)  billion increase in GDP.
C)  (1 − MP
C)   billion increase in GDP.
D)  (MPC − MPS)  billion increase in GDP.E) A) and D)
F) A) and C)

Question 6

A rightward shift of the investment demand curve might be caused by

Accepted Answer

A)  an increase in the price level.
B)  a decline in the real interest rate.
C)  businesses planning to increase their stock of inventories.
D)  an increase in business taxes.E) A) and B)
F) B) and D)

Question 7

Which of the following relations is not correct?

Accepted Answer

A)  1 − MPC = MPS.
B)  APS + APC = 1.
C)  MPS = MPC + 1.
D)  MPC + MPS = 1.E) B) and C)
F) A) and D)

Question 8

The consumption schedule is such that

Accepted Answer

A)  both the APC and the MPC increase as income rises.
B)  the APC is constant and the MPC declines as income rises.
C)  the MPC is constant and the APC declines as income rises.
D)  the MPC and the APC must be equal at all levels of income.E) A) and C)
F) A) and B)

Question 9

Saving equals disposable income plus consumption.

Accepted Answer

A) True 
 B)False

Question 10

(Advanced analysis)  The equation C = 35 + 0.75Y, where C is consumption and Y is disposable income, shows that

Accepted Answer

A)  households will consume three-fourths of whatever level of disposable income they receive.
B)  households will consume $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive.
C)  there is an inverse relationship between disposable income and consumption.
D)  households will save $35 if their disposable income is zero and will consume three-fourths of any increase in disposable income they receive.E) None of the above
F) All of the above

Question 11

The size of the MPC is assumed to be

Accepted Answer

A)  less than zero.
B)  greater than one.
C)  greater than zero but less than one.
D)  two or more.E) A) and B)
F) A) and C)

Question 12

An upward shift of the saving schedule suggests

Accepted Answer

A)  nothing with respect to changes in the APC and APS; only that the MPS has changed.
B)  that the APC and APS have both decreased at each GDP level.
C)  that the APC and APS have both increased at each GDP level.
D)  that the APC has decreased and the APS has increased at each GDP level.E) C) and D)
F) B) and C)

Question 13

If the consumption schedule shifts downward, and the shift was not caused by a tax change, then the saving schedule

Accepted Answer

A)  may shift either upward or downward.
B)  will shift downward.
C)  will shift upward.
D)  will not shift.E) A) and C)
F) None of the above

Question 14

When a consumption schedule is plotted as a straight line, the slope of the consumption line is

Accepted Answer

A)  vertical.
B)  horizontal.
C)  greater than the slope of the 45Â° line.
D)  less than the slope of the 45Â° line.E) B) and C)
F) All of the above

Question 15

During the Great Recession of 2007-2009, the investment demand curve shifted

Accepted Answer

A)  left because of very low interest rates.
B)  right because of very low interest rates.
C)  left because of declines in expected returns.
D)  right because of reductions in tax rates.E) C) and D)
F) A) and B)

Question 16

Which of the following statements about investment spending is false?

Accepted Answer

A)  It is much more volatile than consumption spending.
B)  The percentage swings in real investment spending are greater than the percentage swings in real GDP.
C)  The durability of capital goods is one basic reason for the variability of investment spending.
D)  During the Great Recession in 2007-2009, when interest rates essentially declined to zero, investment spending rose sharply.E) None of the above
F) B) and D)

Question 17

Dissaving occurs when

Accepted Answer

A)  income is greater than saving.
B)  income is less than consumption.
C)  saving is greater than consumption.
D)  saving is greater than the interest rate.E) All of the above
F) C) and D)

Question 18

Which one of the following will cause a movement down along an economy's consumption schedule?

Accepted Answer

A)  an increase in stock prices
B)  a decrease in stock prices
C)  an increase in consumer indebtedness
D)  a decrease in disposable incomeE) A) and B)
F) A) and C)

Question 19

If the consumption schedule shifts upward and the shift was not caused by a tax change, the saving schedule

Accepted Answer

A)  will not shift.
B)  may shift either upward or downward.
C)  will shift downward.
D)  will also shift upward.E) A) and B)
F) A) and C)

Question 20

The investment demand curve portrays an inverse (negative)  relationship between

Accepted Answer

A)  investment and real GDP.
B)  the real interest rate and investment.
C)  the nominal interest rate and investment.
D)  the price level and investment.E) B) and C)
F) C) and D)

Exam 30: Basic Macroeconomic Relationships

A rightward shift of the investment demand curve might be caused by

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An upward shift of the saving schedule suggests

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(Advanced analysis) The equation C = 35 + 0.75Y, where C is consumption and Y is disposable income, shows that

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Saving equals disposable income plus consumption.

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If households do not spend any extra income they receive but instead save the entire extra amount, then the multiplier will be zero.

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Dissaving occurs where

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Which one of the following will cause a movement down along an economy's consumption schedule?

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If the consumption schedule shifts upward and the shift was not caused by a tax change, the saving schedule

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A $1 billion increase in investment will cause a

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If the consumption schedule shifts downward, and the shift was not caused by a tax change, then the saving schedule

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When a consumption schedule is plotted as a straight line, the slope of the consumption line is

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Which of the following statements about investment spending is false?

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Which one of the following will cause a movement up along an economy's saving schedule?

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The consumption schedule is such that

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The investment demand curve portrays an inverse (negative) relationship between

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Which of the following relations is not correct?

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The size of the MPC is assumed to be

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During the Great Recession of 2007-2009, the investment demand curve shifted

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Dissaving occurs when

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The so-called wealth effect will result in households

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