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| 1 | |
Which of the following is a correct statement? All else equal: |
| | A) | a decrease in the real rate of interest will reduce the level of investment |
| | B) | a decrease in the real rate of interest will increase the level of investment |
| | C) | an increase in business taxes will increase the level of investment |
| | D) | an increase in the level of current disposable income will decrease the level of investment |
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| 2 | |
If the slope of the consumption line is .8: |
| | A) | the MPC is .8 |
| | B) | the MPS is .8 |
| | C) | the MPC is 1/.2 |
| | D) | the MPS is 1/.2 |
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| 3 | |
If the MPC is .63, the multiplier is: |
| | A) | 1 / .63 |
| | B) | 1 – .37 |
| | C) | 1 / .37 |
| | D) | .63 / .37 |
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| 4 | |
If the interest rate rises: |
| | A) | investment spending will decrease |
| | B) | the investment demand curve will shift upward |
| | C) | the investment demand curve will shift to the left |
| | D) | the investment demand curve will shift to the right |
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| 5 | |
If Margy's MPC is .9, this means that she will: |
| | A) | spend 90 cents out of every additional dollar of disposable income |
| | B) | spend 90% of her total disposable income |
| | C) | spend all her disposable income when her disposable income is $9000 |
| | D) | save 10% of her total disposable income |
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| 6 | |
If the MPC is constant for every level of disposable income: |
| | A) | the consumption schedule will be a straight, upward-sloping line through the origin |
| | B) | the APC will also be constant |
| | C) | the MPS will also be constant |
| | D) | the APC will increase as income increases |
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| 7 | |
Answer the next question on the basis of the following data:
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Refer to the data. At a disposable income of $50, the average propensity to consume is: |
| | A) | .7 |
| | B) | .6 |
| | C) | .4 |
| | D) | .8 |
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| 8 | |
The multiplier is equal to all of the following except: |
| | A) | 1 / (1 – MPC) |
| | B) | 1 / (APC – 1) |
| | C) | 1 / (MPS) |
| | D) | change in real GDP / initial change in spending |
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| 9 | |
The multiplier process suggests that: |
| | A) | any initial drop in the price level causes a proportionately larger increase in consumption spending |
| | B) | any initial increase in disposable income causes a larger increase in investment spending |
| | C) | any initial increase in the interest rate will cause a larger increase in the money supply |
| | D) | any initial increase in aggregate expenditures will cause a larger increase in GDP |
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| 10 | |
Answer the next question on the basis of the following data:
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Refer to the data. The multiplier for this economy is: |
| | A) | 7 |
| | B) | 2/3 |
| | C) | 3 1/3 |
| | D) | 2 |
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