Question 1

The figure given below shows the consumption function of a household.
Figure 9.2
 
-In Figure 9.2, consumption equals disposable income:

Accepted Answer

A)   at point A only.
B)   at point B only.
C)   at point C only.
D)   at points A and C only.
E)   at all points on the consumption function.F) A) and D)
G) B) and D)

Question 2

An MPI of 0.4 indicates that for every 100 percent increase in domestic income:

Accepted Answer

A)   there is a 40 percent increase in investment.
B)   there is a 60 percent increase in investment.
C)   there is a 40 percent decline in imports.
D)   there is a 60 percent increase in imports.
E)   there is a 40 percent increase in imports.F) A) and E)
G) All of the above

Question 3

Any increase in autonomous consumption is associated with:

Accepted Answer

A)   an equivalent increase in autonomous saving.
B)   an equivalent decrease in autonomous saving.
C)   an equivalent increase in the slope of the saving function.
D)   an equivalent decrease in the slope of the saving function.
E)   an equivalent movement along the saving function.F) B) and D)
G) B) and C)

Question 4

Table 9.2
   Cost of machine $300,000 Arnual autput from mechine $35,000 Arnual interett rate on loans 9%\begin{array} { | l c | } \hline 	ext { Cost of machine } & \$ 300,000 \\hline 	ext { Arnual autput from mechine } & \$ 35,000 \\hline 	ext { Arnual interett rate on loans } & 9 \% \\hline\end{array} Cost of machine  Arnual autput from mechine  Arnual interett rate on loans ​$300,000$35,0009%​​ 
-Refer to Table 9.2. If a firm purchases the machine by taking out a one-year loan, what happens to the firm's rate of return on the investment if the interest rate increases to 10 percent?

Accepted Answer

A)   It increases to 1.5 percent
B)   It increases to 0.15 percent
C)   It decreases to 1.5 percent
D)   It decreases to 1.7 percent
E)   It decreases to 0.17 percent F) C) and D)
G) A) and D)

Question 5

The part of the disposable income that is not consumed by households is:

Accepted Answer

A)   given away in the form of taxes.
B)   given away as charity.
C)   saved.
D)   deducted as a depreciation cost.
E)   spent on imports.F) A) and C)
G) D) and E)

Question 6

Suppose that the consumption function crosses the 45-degree line at a disposable income level of $800. Assume further that saving equals $200 when disposable income is $1,300. This implies that the MPC must equal 0.6.

Accepted Answer

A) True 
 B)False

Question 7

As capacity utilization in an economy rises:

Accepted Answer

A)   firms sell their fixed assets to remain solvent.
B)   the gap between the potential output and actual output widens.
C)   firms reduce their demand for labor.
D)   employment of inputs by firms declines.
E)   firms add more factories and machines and increase output.F) A) and B)
G) C) and D)

Question 8

The figure given below represents the consumption function of a country.
Figure 9.3
 
-Refer to Figure 9.3. If the marginal propensity to consume is equal to 0.3, then:

Accepted Answer

A)   autonomous consumption would decrease.
B)   the total amount of dissaving would increase.
C)   consumption spending would equal disposable income at an income level greater than $400.
D)   consumption spending would equal disposable income at an income level less than $400.
E)   consumption spending would equal disposable income at the same income level of $400.F) B) and C)
G) D) and E)

Question 9

The figure given below shows the aggregate expenditures function of an economy.
Figure 9.5
 
-Refer to Figure 9.5. Which of the following statements is true?

Accepted Answer

A)   Autonomous net exports equal the distance between A and C.
B)   Autonomous consumption is equal to the distance between A and C.
C)   There is a deficit in the merchandise and services account.
D)   Exports exceed imports for the country in question.
E)   Autonomous consumption is equal to the distance between 0 and C.F) C) and E)
G) C) and D)

Question 10

Which of the following factors will not affect the profit expectations of business firms and change the level of investment?

Accepted Answer

A)   Entry of new firms into the market
B)   Introduction of new taxes
C)   Announcement of new government subsidies
D)   The current level of GDP
E)   The marginal propensity to consumeF) B) and D)
G) A) and E)

Question 11

Other things equal, an increase in the consumer confidence index tends to raise the average propensity to consume.

Accepted Answer

A) True 
 B)False

Question 12

Households in America tend to consume more and more as they grow older.

Accepted Answer

A) True 
 B)False

Question 13

The net export function illustrates that:

Accepted Answer

A)   net exports are a positive function of domestic income.
B)   net exports are independent of domestic income.
C)   net exports are a negative function of domestic income.
D)   imports are independent of domestic income.
E)   exports are independent of foreign income.F) A) and D)
G) B) and D)

Question 14

The figure given below shows the consumption function of a household.
Figure 9.2
 
-In Figure 9.2, a decrease in disposable income would be illustrated by:

Accepted Answer

A)   shifting the whole consumption function upward.
B)   shifting the whole consumption function downward.
C)   moving along the consumption function to the left.
D)   moving along the consumption function to the right.
E)   moving from point A to point D.F) B) and E)
G) A) and D)

Question 15

Suppose the Kwik Print Company considers an investment project that involves the purchase of a copier with an expected output of $4,000. If the firm has to borrow $3,000 and the rate of return is 11.1 percent, then the interest rate associated with the loan must be 20 percent.

Accepted Answer

A) True 
 B)False

Question 16

Changes in autonomous consumption will affect the slope of the consumption function.

Accepted Answer

A) True 
 B)False

Question 17

A key assumption of the Keynesian model of macroeconomics is a fixed _____.

Accepted Answer

A)   interest rate
B)   price level
C)   exchange rate
D)   real GDP
E)   unemployment levelF) All of the above
G) A) and B)

Question 18

If capacity utilization by businesses remains constant, investment spending is likely to be the most volatile component of aggregate expenditures in the United States.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following would cause a change in imports?

Accepted Answer

A)   A change in foreign income
B)   A change in foreign consumption
C)   A change in domestic tastes for foreign products
D)   A change in foreign tastes for domestic products
E)   A change in domestic investment spendingF) All of the above
G) B) and E)

Question 20

When government spending is added to consumption and planned investment, the slope of the aggregate expenditure function increases.

Accepted Answer

A) True 
 B)False

Exam 9: Aggregate Expenditures

Suppose the Kwik Print Company considers an investment project that involves the purchase of a copier with an expected output of $4,000. If the firm has to borrow $3,000 and the rate of return is 11.1 percent, then the interest rate associated with the loan must be 20 percent.

Correct Answer
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The figure given below shows the aggregate expenditures function of an economy. Figure 9.5 -Refer to Figure 9.5. Which of the following statements is true?

Correct Answer
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Suppose that the consumption function crosses the 45-degree line at a disposable income level of $800. Assume further that saving equals $200 when disposable income is $1,300. This implies that the MPC must equal 0.6.

Correct Answer
verified

Other things equal, an increase in the consumer confidence index tends to raise the average propensity to consume.

Correct Answer
verified

An MPI of 0.4 indicates that for every 100 percent increase in domestic income:

Correct Answer
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As capacity utilization in an economy rises:

Correct Answer
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The part of the disposable income that is not consumed by households is:

Correct Answer
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A key assumption of the Keynesian model of macroeconomics is a fixed _____.

Correct Answer
verified

When government spending is added to consumption and planned investment, the slope of the aggregate expenditure function increases.

Correct Answer
verified

The net export function illustrates that:

Correct Answer
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Households in America tend to consume more and more as they grow older.

Correct Answer
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Which of the following would cause a change in imports?

Correct Answer
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The figure given below shows the consumption function of a household. Figure 9.2 -In Figure 9.2, consumption equals disposable income:

Correct Answer
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Which of the following factors will not affect the profit expectations of business firms and change the level of investment?

Correct Answer
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The figure given below shows the consumption function of a household. Figure 9.2 -In Figure 9.2, a decrease in disposable income would be illustrated by:

Correct Answer
verified

Changes in autonomous consumption will affect the slope of the consumption function.

Correct Answer
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Correct Answer
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If capacity utilization by businesses remains constant, investment spending is likely to be the most volatile component of aggregate expenditures in the United States.

Correct Answer
verified

The figure given below represents the consumption function of a country. Figure 9.3 -Refer to Figure 9.3. If the marginal propensity to consume is equal to 0.3, then:

Correct Answer
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Any increase in autonomous consumption is associated with:

Correct Answer
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Exam 9: Aggregate Expenditures

Suppose the Kwik Print Company considers an investment project that involves the purchase of a copier with an expected output of $4,000. If the firm has to borrow $3,000 and the rate of return is 11.1 percent, then the interest rate associated with the loan must be 20 percent.

Correct AnswerverifiedShow Answer

The figure given below shows the aggregate expenditures function of an economy. Figure 9.5 -Refer to Figure 9.5. Which of the following statements is true?

Correct AnswerverifiedShow Answer

Suppose that the consumption function crosses the 45-degree line at a disposable income level of $800. Assume further that saving equals $200 when disposable income is $1,300. This implies that the MPC must equal 0.6.

Correct AnswerverifiedShow Answer

Other things equal, an increase in the consumer confidence index tends to raise the average propensity to consume.

Correct AnswerverifiedShow Answer

An MPI of 0.4 indicates that for every 100 percent increase in domestic income:

Correct AnswerverifiedShow Answer

As capacity utilization in an economy rises:

Correct AnswerverifiedShow Answer

The part of the disposable income that is not consumed by households is:

Correct AnswerverifiedShow Answer

A key assumption of the Keynesian model of macroeconomics is a fixed _____.

Correct AnswerverifiedShow Answer

When government spending is added to consumption and planned investment, the slope of the aggregate expenditure function increases.

Correct AnswerverifiedShow Answer

The net export function illustrates that:

Correct AnswerverifiedShow Answer

Households in America tend to consume more and more as they grow older.

Correct AnswerverifiedShow Answer

Which of the following would cause a change in imports?

Correct AnswerverifiedShow Answer

The figure given below shows the consumption function of a household. Figure 9.2 -In Figure 9.2, consumption equals disposable income:

Correct AnswerverifiedShow Answer

Which of the following factors will not affect the profit expectations of business firms and change the level of investment?

Correct AnswerverifiedShow Answer

The figure given below shows the consumption function of a household. Figure 9.2 -In Figure 9.2, a decrease in disposable income would be illustrated by:

Correct AnswerverifiedShow Answer

Changes in autonomous consumption will affect the slope of the consumption function.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If capacity utilization by businesses remains constant, investment spending is likely to be the most volatile component of aggregate expenditures in the United States.

Correct AnswerverifiedShow Answer

The figure given below represents the consumption function of a country. Figure 9.3 -Refer to Figure 9.3. If the marginal propensity to consume is equal to 0.3, then:

Correct AnswerverifiedShow Answer

Any increase in autonomous consumption is associated with:

Correct AnswerverifiedShow Answer

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