Question 1

Which of the following would not increase the Gallego family's real net wealth?

Accepted Answer

A)  an increase in the value of their home
B)  an increase in the value of Mrs. Gallego's pension fund
C)  an increase in the amount that the Gallegos have saved in the bank
D)  a rise in the price level
E)  a decrease in the size of the mortgage payments on the Gallego's homeF) B) and E)
G) All of the above

Question 2

As the U.S. price level decreases, other things equal, U.S. products become

Accepted Answer

A)  more expensive abroad, which decreases U.S. exports
B)  less expensive abroad, which increases U.S. exports
C)  more expensive abroad, which has no effect on U.S. exports, since exports are assumed to be constant
D)  less expensive abroad, which has no effect on U.S. exports, since exports are assumed to be constant
E)  more expensive abroad, which increases U.S. exportsF) B) and D)
G) B) and C)

Question 3

If the U.S. price level decreases, other things equal, U.S. net exports will

Accepted Answer

A)  increase
B)  decrease
C)  remain constant, since net exports are assumed to be constant
D)  increase only if the marginal propensity to import also increases
E)  increase only if there is inflation abroadF) None of the above
G) A) and E)

Question 4

An increase in wealth will

Accepted Answer

A)  shift the consumption function upward
B)  make the consumption function steeper
C)  cause a movement upward along the consumption function
D)  cause a movement downward along the consumption function
E)  make the consumption function flatterF) All of the above
G) A) and B)

Question 5

A decrease in the value of the U.S. dollar relative to other currencies will

Accepted Answer

A)  shift the autonomous net export function upward
B)  shift the autonomous net export function downward
C)  cause a rightward movement along the autonomous net export function
D)  cause a leftward movement along the autonomous net export function
E)  show no movement along or shift of the autonomous net export functionF) A) and D)
G) A) and C)

Question 6

An increase in the interest rate, other things equal, would

Accepted Answer

A)  have no effect on investment
B)  increase the amount invested since the rate of return would be lower
C)  increase the amount invested because income would rise
D)  reduce the amount invested because the opportunity costs of investing would be higher
E)  increase the amount invested because the rate of return would be higherF) C) and D)
G) B) and C)

Question 7

Exhibit 9-1
 
-Given the data in Exhibit 9-1, the level of saving at a disposable income of $1,200 is

Accepted Answer

A)  $80
B)  $240
C)  $950
D)  $1,200
E)  $1,300F) A) and C)
G) A) and B)

Question 8

Saving in our simple model

Accepted Answer

A)  varies inversely with income
B)  is determined primarily by the interest rate
C)  is positive when a person spends less than her income
D)  can never be negative because it is a stock
E)  can never be negative because it is a flowF) C) and E)
G) A) and E)

Question 9

The consumption function relates consumption spending to

Accepted Answer

A)  the price level
B)  interest rates
C)  disposable income
D)  expectations about the price level
E)  household wealthF) A) and C)
G) All of the above

Question 10

An increase in wealth will

Accepted Answer

A)  increase consumption and saving at each level of income
B)  increase saving and decrease consumption at each level of income
C)  decrease consumption and saving at each level of income
D)  increase consumption and decrease saving at each level of income
E)  have no effect on consumption, since consumption is a function of incomeF) C) and D)
G) All of the above

Question 11

The United States, with only one __________ of the world's population, accounts for about one __________ of the world's imports and one __________ of the world's exports.

Accepted Answer

A)  twentieth, sixth, ninth
B)  sixth, ninth, twentieth
C)  ninth, twentieth, sixth
D)  twentieth, ninth, sixth
E)  ninth, sixth, twentiethF) B) and C)
G) B) and D)

Question 12

The marginal propensity to consume is defined as the

Accepted Answer

A)  fraction of consumption that is spent on goods, both durable and nondurable
B)  fraction of a change in income that is spent on consumption
C)  fraction of a change in income that is spent on investment
D)  average amount of consumption at different levels of income
E)  average amount of consumption at a given level of incomeF) B) and E)
G) A) and D)

Question 13

Exhibit 9-3
 
-In Exhibit 9-3, when real disposable income is equal to $3 billion, saving is equal to

Accepted Answer

A)  $-2 billion
B)  $-1 billion
C)  0
D)  $1 billion
E)  $2 billionF) A) and E)
G) B) and C)

Question 14

On a graph showing investment along the vertical axis and income along the horizontal axis,

Accepted Answer

A)  the investment line slopes downward
B)  the investment line would shift upward if income increased
C)  the investment line would shift downward if the interest rate increased
D)  investment is the independent variable and income is the dependent variable
E)  the investment line would shift downward if income increasedF) None of the above
G) B) and D)

Question 15

If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000, then its

Accepted Answer

A)  marginal propensity to consume is -0.67
B)  marginal propensity to consume is 0.88
C)  marginal propensity to consume is 0.20
D)  marginal propensity to save is zero
E)  marginal propensity to save is 0.12F) B) and C)
G) A) and E)

Question 16

As disposable income increases,

Accepted Answer

A)  consumption and saving both increase
B)  consumption increases and saving decreases
C)  consumption and saving both decrease
D)  consumption decreases but saving increases
E)  saving increases, but we cannot predict what happens to consumptionF) D) and E)
G) A) and B)

Question 17

Historically, consumption spending in the United States has

Accepted Answer

A)  increased as a percentage of income
B)  remained approximately constant as a percentage of income
C)  decreased as a percentage of income
D)  remained constant over time
E)  increased more than incomeF) A) and E)
G) B) and E)

Question 18

A household's net wealth is the value of

Accepted Answer

A)  its current income minus the value of all its liabilities
B)  all its assets minus their tax liabilities
C)  all its assets minus the value of all its liabilities
D)  all its assets minus its income
E)  its current income minus its tax liabilitiesF) A) and B)
G) B) and E)

Question 19

The slope of the consumption function equals the marginal propensity to consume.

Accepted Answer

A) True 
 B)False

Question 20

If investment is autonomous, an increase in income will shift the investment function upward.

Accepted Answer

A) True 
 B)False

Exam 10: Aaggregate Expenditure and Agregate Demand

As the U.S. price level decreases, other things equal, U.S. products become

Correct AnswerverifiedShow Answer

A decrease in the value of the U.S. dollar relative to other currencies will

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On a graph showing investment along the vertical axis and income along the horizontal axis,

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A household's net wealth is the value of

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The consumption function relates consumption spending to

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Exhibit 9-3 -In Exhibit 9-3, when real disposable income is equal to $3 billion, saving is equal to

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As disposable income increases,

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Historically, consumption spending in the United States has

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Exhibit 9-1 -Given the data in Exhibit 9-1, the level of saving at a disposable income of $1,200 is

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If a household's income falls from $20,000 to $17,000 and its consumption spending falls from $18,000 to $15,000, then its

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An increase in wealth will

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Saving in our simple model

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The marginal propensity to consume is defined as the

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The United States, with only one __________ of the world's population, accounts for about one __________ of the world's imports and one __________ of the world's exports.

Correct AnswerverifiedShow Answer

If the U.S. price level decreases, other things equal, U.S. net exports will

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An increase in wealth will

Correct AnswerverifiedShow Answer

If investment is autonomous, an increase in income will shift the investment function upward.

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The slope of the consumption function equals the marginal propensity to consume.

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Which of the following would not increase the Gallego family's real net wealth?

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An increase in the interest rate, other things equal, would

Correct AnswerverifiedShow Answer

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The United States, with only one of the world's population, accounts for about one of the world's imports and one __ of the world's exports.

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