WorksheetsEconomics 4
Total questions: 55
Worksheet time: 28mins
If the marginal propensity to consume were 60 percent, how much would be saved of an additional dollar of income?
$1.
$.60.
$.40.
impossible to say
The level of GDP, the overall price level, and the level of employment are influenced by events in this market
the goods-and-services market.
the labor markets.
the financial (money) markets.
All of the above
Which of the following will NOT shift the consumption function upward?
an increase in wealth.
a fall in the real interest rate.
an increase in disposable income.
none of the above shift the consumption function upward.
As a nation’s GDP increases, that nation’s
autonomous consumption decreases.
autonomous consumption increases.
imports increase.
exports increase.
In the above figure, the line APE = C + I + G + NX is called
the consumption function.
the aggregate demand.
the saving function.
the expenditure function.
The marginal propensity to save (MPS) is
total saving divided by total consumption expenditure.
the decrease in saving per dollar increase in consumption expenditure.
the decrease in saving that is caused by inflation.
the increase in saving per dollar increase in disposable income.
The slope of the aggregate expenditure curve equals the change in
autonomous expenditure divided by the change in real GDP.
real GDP divided by the change in planned expenditure.
planned expenditure divided by the change in real GDP.
government expenditure divided by the change in real GDP.
Which of the following is NOT an autonomous expenditure in the aggregate expenditures model?
imports
investment
exports
government purchases
When investment is below planned investment, aggregate planned expenditure is ......... than actual aggregate expenditure and inventories are ...............than planned.
greater; less
less; greater
less; less
greater; greater
The multiplier is
the ratio of the change in real GDP to the change in autonomous expenditure.
the ratio of the change in autonomous expenditure to the change in real GDP.
the ratio of the equilibrium level of real GDP to the change in induced expenditure.
the ratio of the change in induced expenditure to the change in autonomous expenditure.
If an increase in a household’s disposable income from $6,000 to $8,000 boosts its consumption expenditure from $3,000 to $4,000, the
slope of the consumption function is 0.5
slope of the consumption function is 1000.
household is dissaving.
slope of the consumption function is 0.3
The multiplier effect
magnifies small changes in spending into larger changes in output and income.
increases the MPC.
generates instability in autonomous expenditure.
promotes stability of the general price level.
The consumption function directly relates consumption to the level of
taxes.
income.
wages.
prices.
When inventories rise,
actual investment is greater than planned investment.
actual investment is less than planned investment.
actual investment falls, while planned investment remains the same.
both actual investment and planned investment rise.
Disposable income is
income plus transfer payments minus consumption expenditure.
income minus saving.
total income divided by the price level.
income minus net taxes.
In the above figure, the line C = Yd is called
the consumption function.
the saving function.
the expenditure function.
the 45-degree line.
Dissaving occurs when a household
consumes more than it receives in disposable income.
spends more than it saves.
saves more than it spends.
spends less than it receives in disposable income.
The marginal propensity to consume
equals 1.
is negative if dissaving is present.
exceeds 1.
is between 0 and 1.
The consumption function relates the consumption expenditure decisions of households to
the nominal interest rate.
investment decisions of firms.
saving decisions of households.
the level of disposable income.
Inventories are part of
net exports.
government spending.
investment.
personal consumption.
A decrease in autonomous consumption will
decrease the marginal propensity to save.
shift the consumption function upward.
change the slope of the consumption function.
shift the aggregate expenditure function downward.
If planned expenditure equals $2900 when GDP is $3300, then
actual investment will exceed planned investment
there will be excess demand for most goods.
the economy must have a trade surplus to sell the excess goods and services.
inventories will decrease by $400.
An economy saves 50 percent of any increase in income and there are no income taxes or imports. Then, an increase in investment of $3 billion can produce a short run increase in real GDP of as much as
$1.5 billion.
$50 billion.
$0.5 billion.
$6 billion.
An increase in the size of the multiplier can be caused by
an increase in the MPS.
an increase in the MPC.
a decrease in induced expenditure.
an increase in the marginal propensity to import.
f $75 of an extra $100 is consumed, the marginal propensity to consume is:
25 percent.
50 percent.
75 percent.
100 percent.
The marginal propensity to consume is
the percentage of interest income consumed.
the percentage of a given income that is consumed.
one minus the fraction of total disposable income that is saved.
the ratio of the change in consumption expenditure to the change in disposable income.
The graph of the consumption function has consumption expenditure on the vertical axis and
disposable income on the horizontal axis.
the Consumer Price Index on the horizontal axis.
time on the horizontal axis.
the interest rate on the horizontal axis.
Autonomous consumption
is independent of income and must be equal to zero.
increases with income.
decreases with income.
is independent of income.
Suppose the consumption function is given by the equation C = 40 + 0.8YD, where YD is disposable income. What is the marginal propensity to save?
80
40
0.8
0.2
Any expenditure component that depends on the level of real GDP is called
autonomous expenditure.
spurious expenditure.
equilibrium expenditure.
induced expenditure.
The presence of imports .......... the size of the multiplier because with an increase of real GDP,.............
decreases; Czech consumers buy goods from other countries.
increases; Czech consumers buy goods from other countries.
decreases; Czech firms can sell goods to other countries.
increases; Czech firms can sell goods to other countries.
A consumption function shows a
negative relationship between consumption expenditure and disposable income.
positive relationship between consumption expenditure and price level.
positive relationship between consumption expenditure and disposable income.
negative relationship between consumption expenditure and saving.
The curve that relates the level of total planned expenditure to the level of real GDP is the
aggregate expenditure curve.
equilibrium GDP curve.
consumption function.
dissavings function.
If the multiplier is 4 and there are no imports or income taxes, the marginal propensity to consume is
0.75.
1.00.
0.25.
0.50.
An increase in expected future income.............
shifts the consumption function upward
shifts the saving function upward
increases saving
decreases consumption expenditure
The marginal propensity to save is:
the change in saving when income changes by $1.
the saving divided by income.
the portion of income going to saving.
saving plus investment.
In the Keynesian model of aggregate expenditure, real GDP is determined by the
level of aggregate supply.
level of taxes.
level of aggregate demand.
price level.
What is the relationship between total production and total sales?
GDP = final sales plus changes in business inventories.
Final Sales = GDP plus changes in business inventories.
GDP = final sales multiplied by the change in business inventories.
There is no relationship at all between total production and total sales.
The marginal propensity to consume equals 1 minus the
marginal propensity to import.
marginal propensity to pay taxes.
marginal propensity to save.
marginal propensity to invest.
The Keynesian model of aggregate expenditure assumes that
both individual prices and the price level are fixed.
individual prices are flexible but the price level is fixed.
individual prices are fixed but the price level is flexible.
both individual prices and the price level are flexible.
If the marginal propensity to consume is 0.7, every $10 increase in disposable income increases
saving by $0.30.
consumption expenditure by $0.70.
consumption expenditure by $17.00.
consumption expenditure by $7.00.
The relationship between the multiplier and the MPC is
converging at higher incomes.
inverse, so that as the MPC increases, the value of the multiplier decreases.
unrelated because the multiplier relates to the MPS not the MPC.
positive, so that as the MPC increases, so does the value of the multiplier.
The marginal propensity to save
equals 1.
is between 0 and 1.
exceeds 1.
is negative if dissaving is present.
In the above figure, at a disposable income level of $400 billion, saving equals
zero.
$200 billion.
consumption expenditures.
disposable income.
A movement along the consumption function is the result of changes in
expected future income.
the real interest rate.
disposable income.
All of the above answers are correct.
As interest rates increase:
consumption increases.
investment increases.
investment decreases.
saving decreases.
When inventories fall below their planned level, then firms
decrease production.
wait until spending plans are revised.
revise their inventory plans.
increase production.
Equilibrium expenditure occurs where the aggregate expenditure curve crosses the
horizontal axis.
45-degree line.
consumption function.
vertical axis.
If aggregate planned expenditures are less than real GDP then
firms’ inventories will decrease and real GDP will decrease as production falls.
the economy remains in disequilibrium until aggregate planned expenditures increase to the level of real GDP.
firms’ inventories will increase and real GDP will decrease as production falls.
firms must increase their planned expenditures until aggregate planned expenditures increase to the level of real GDP.
If consumption expenditures for a household increase from $2000 to $2700 when disposable income rises from $2000 to $3000, the marginal propensity to consume is
0.6
0.3
0.4
0.7
The marginal propensity to consume measures how much
consumption expenditure occurs at the equilibrium income.
disposable income is consumed.
of a change in disposable income will be consumed.
disposable income goes to saving.
When the consumption function lies above the 45-degree line, households
are dissaving.
spend on consumption a decreasing percentage of any increase in income.
save all of any increase in income.
spend on consumption an increasing percentage of any increase in income.
The slope of the consumption function is
negative
1
greater than 1
less than 1
In the very short term, planned investment ....... when GDP changes and planned consumption expenditure ........ when GDP changes.
does not change; changes
changes; changes
changes; does not change
does not change; does not change
Which of the following is considered investment?
the production of something that is used to create value in the future.
purchases by firms of new buildings and equipment and inventories.
the creation of capital stock.
All of the above.
