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| 1 | |
If consumption and disposable income are equal at a particular level of income: |
| | A) | the MPC must be one at this point |
| | B) | the MPS must be zero at this point |
| | C) | the APC must be less than one at this point |
| | D) | saving must be zero at this point |
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| 2 | |
Suppose that for the entire economy, no investment projects will yield an expected real return of more than 12%. However, $10 billion worth of projects will yield expected real returns of 9% to 12%; an additional $10 billion will yield expected real returns of 6% to 9%; an additional $10 billion will yield expected real returns of 3% to 6%; $10 billion will yield expected real returns of 0% to 3%. If the real rate of interest is 6%, desired investment spending will be: |
| | A) | $0 billion |
| | B) | $10 billion |
| | C) | $20 billion |
| | D) | $30 billion |
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| 3 | |
Which one of the following is not predicted to shift the consumption schedule upwards? |
| | A) | An increase in disposable income |
| | B) | An increase in household wealth |
| | C) | A reduction in real interest rates |
| | D) | A reduction in household debt |
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| 4 | |
The investment demand curve will shift to the left if: |
| | A) | the interest rate decreases |
| | B) | the interest rate increases |
| | C) | expected returns on investment increase |
| | D) | business taxes increase |
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| 5 | |
Use the following diagram for this question.
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Which of the following might have caused the shift from consumption schedule C1 to schedule C2? |
| | A) | An increase in disposable income |
| | B) | An increase in household wealth |
| | C) | An increase in household debt |
| | D) | An increase in taxes |
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| 6 | |
Increases in disposable income tend to: |
| | A) | reduce the MPC |
| | B) | increase the MPC |
| | C) | reduce the APC |
| | D) | increase the APC |
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| 7 | |
Assume the MPC is 3/4. If investment spending falls by $10 billion, the level of GDP will: |
| | A) | fall by $40 billion |
| | B) | fall by $30 billion |
| | C) | fall by $10 billion |
| | D) | fall by $7.5 billion |
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| 8 | |
Answer the next question on the basis of the following data:
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Refer to the data. The MPS is: |
| | A) | decreasing as disposable income increases |
| | B) | 0 |
| | C) | .05 |
| | D) | .3 |
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| 9 | |
The multiplier effect magnifies: |
| | A) | changes in consumption spending only |
| | B) | changes in investment spending only |
| | C) | changes in net export spending only |
| | D) | any change in aggregate spending |
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| 10 | |
All else equal, the larger the MPC: |
| | A) | the larger the MPS |
| | B) | the smaller the APC |
| | C) | the smaller the slope of the consumption schedule |
| | D) | the larger the multiplier |
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