Economics (McConnell) AP Edition, 19th Edition

Chapter 27: Basic Macroeconomic Relationships

Quiz

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
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 9.1% to 12%, an additional $10 billion will yield expected real returns of 6.1% to 9%, an additional $10 billion will yield expected real returns of 3.1% to 6%, and an additional $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
3
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
4
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
5
Suppose the MPC is ¾. 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
6
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
7
If the MPC is .63, the multiplier is:
A)1 / .63
B)1 – .37
C)1 / .37
D).63 / .37
8
All else equal, if the interest rate rises:
A)planned 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
9
The consumption schedule is:
A)an inverse relationship between consumption and the price level
B)a direct relationship between consumption and disposable income
C)an inverse relationship between consumption and saving
D)an inverse relationship between consumption and the tax rate
10
Along a particular saving schedule, each change in disposable income of $15 billion generates an additional $3 billion in saving. Therefore:
A)the MPS is .3
B)the MPS is .2
C)the APC is .8
D)the slope of the consumption schedule is .7
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