QUESTION 1 If the slope of the consumption schedule is 0

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QUESTION 1

If the slope of the consumption schedule is 0.75, then the slope of the saving schedule?

A. is 0.25.

B. is 0.75.

C. is 1.25.

D. cannot be determined from the data.

 

QUESTION 2

The multiplier effect indicates that?

A. a decline in the interest rate will cause a proportionately larger increase in investment.

B. a change in spending will change aggregate income by a larger amount.

C. a change in spending will increase aggregate income by the same amount.

D. an increase in total income will generate a larger change in aggregate expenditures.

 

QUESTION 3

If Matt's disposable income increases from $4,000 to $4,500 and his level of saving increases from $200 to $325, it may be concluded that his marginal propensity to?

A. consume is 0.80.

B. consume is 0.75.

C. consume is 0.60.

D. save is 0.30.

 

QUESTION 4

If the marginal propensity to save is 0.2 in an economy, a $20 billion rise in investment spending will increase?

A. GDP by $120 billion.

B. GDP by $20 billion.

C. saving by $25 billion.

D. consumption by $80 billion.

 

QUESTION 5

The change in real GDP resulting from an initial change in spending can be calculated by?

A. dividing the multiplier by the initial change in spending.

B. dividing the initial change in spending by the multiplier.

C. multiplying the multiplier by the initial change in spending.

D. adding the initial change in spending to the multiplier.

 

QUESTION 6

The saving schedule is drawn on the assumption that as income increases,?

A. saving will decline absolutely and as a percentage of income.

B. saving will increase absolutely but remain constant as a percentage of income.

C. saving will increase absolutely but decline as a percentage of income.

D. saving will increase absolutely and as a percentage of income.

QUESTION 7

With a marginal propensity to save of 0.4, the marginal propensity to consume will be? 

A.1.0 minus 0.4. 

B. 0.4 minus 1.0. 

C. the reciprocal of the MPS. 

D. 0.4.

 

QUESTION 8

The nominal rate of interest is 8.5 percent, and the real rate is 5 percent. The expected rate of return on an investment is 8 percent. The firm should?

A. not undertake the investment, because the expected rate of return of 8 percent is less than the nominal interest rate.

B. not undertake the investment, because the expected rate of return of 8 percent is less than the nominal plus the real interest rate.

C. undertake the investment because the expected rate of return of 8 percent is greater than the difference between the nominal and real interest rates.

D. undertake the investment because the expected rate of return of 8 percent is greater than the real rate of interest.

 

QUESTION 9

Which one of the following will cause a movement down along an economy's consumption schedule?

A. an increase in stock prices 

B. a decrease in stock prices 

C. an increase in consumer indebtedness 

D. a decrease in disposable income

 

QUESTION 10

A. an increase in disposable income 

B. a decrease in interest rates 

C.a significant decrease in stock prices 

D. a decrease in people's ability to borrow