ECON EXAM 3 CH. 9

question

The primary determinant of consumption spending is the price level

answer

false

question

The difference between consumption spending and disposable income

answer

equal savings

question

Disposable income is equal to consumption

answer

plus saving

question

If disposable income decreases, there is typically a decrease in consumption spending.

answer

true

question

The marginal propensity to consume is the fraction of a change in income that is saved.

answer

false

question

If a household's income rises from $46,000 to $46,700 and its consumption spending rises from $35,800 to $36,400, then its

answer

marginal propensity to consume is 0.86

question

Suppose that when disposable income rises from $5.2 trillion to $6.0 trillion, consumption rises from $5.0 trillion to $5.6 trillion. What is the marginal propensity to consume?

answer

0.75

question

The marginal propensity to consume is defined as the

answer

fraction of a change in income that is spent on consumption

question

An increase in the MPC will cause the consumption function to become steeper (rotate upwards).

answer

true

question

If income increases by $100 and the MPC is 3/4 (0.75), then consumption increases by

answer

$75

question

If income increases by $100 and saving increases by $25, the slope of the saving function equals

answer

question

Expectations that the price level will rise in the future cause consumption to rise today.

answer

true

question

A decrease in net wealth will

answer

increase saving and decrease consumption at each level of income

question

A decrease in the price level will

answer

increase consumption because the value of wealth has increased

question

Expectations that the price level will decrease in the future will

answer

shift the current consumption function downward

question

Which of the following would not shift the consumption function?

answer

a change in disposable income

question

Which of the following will not shift the consumption function upward?

answer

expectations of lower future income

question

Which of the following would not shift the consumption function downward?

answer

a decline in business profits

question

The opportunity cost of investing in capital is the interest rate.

answer

true

question

A firm's level of investment is tied to the interest rate

answer

because the interest rate represents the opportunity cost of investing in capital

question

Which of the following would tend to shift the investment function upward?

answer

a cut in corporate taxes that raises after-tax profits

question

If autonomous investment were measured on the vertical axis and disposable income were measured on the horizontal axis, what would the graph look like?

answer

a horizontal line

question

An increase in the interest rate, other things constant, decreases the amount of investment spending

answer

True

question

If the interest rate increases, then there will be

answer

a downward shift of the autonomous investment function

question

During recession years,

answer

investment declines much faster than GDP declines

question

A household's net wealth is the value of

answer

all its assets minus the value of all its liabilities

question

Net exports

answer

decrease as real domestic income increases

question

An increase in the value of the U.S. dollar in world markets, other things constant, would increase the demand for U.S. exports.

answer

false

question

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

answer

decrease

question

The relationship between consumption and income is

answer

positive and stable

question

The economy's investment demand curve shows the inverse relationship between the quantity of investment demanded and the market interest rate, other things held constant.

answer

true

1 of 31

question

The primary determinant of consumption spending is the price level

answer

false

question

The difference between consumption spending and disposable income

answer

equal savings

question

Disposable income is equal to consumption

answer

plus saving

question

If disposable income decreases, there is typically a decrease in consumption spending.

answer

true

question

The marginal propensity to consume is the fraction of a change in income that is saved.

answer

false

question

If a household's income rises from $46,000 to $46,700 and its consumption spending rises from $35,800 to $36,400, then its

answer

marginal propensity to consume is 0.86

question

Suppose that when disposable income rises from $5.2 trillion to $6.0 trillion, consumption rises from $5.0 trillion to $5.6 trillion. What is the marginal propensity to consume?

answer

0.75

question

The marginal propensity to consume is defined as the

answer

fraction of a change in income that is spent on consumption

question

An increase in the MPC will cause the consumption function to become steeper (rotate upwards).

answer

true

question

If income increases by $100 and the MPC is 3/4 (0.75), then consumption increases by

answer

$75

question

If income increases by $100 and saving increases by $25, the slope of the saving function equals

answer

question

Expectations that the price level will rise in the future cause consumption to rise today.

answer

true

question

A decrease in net wealth will

answer

increase saving and decrease consumption at each level of income

question

A decrease in the price level will

answer

increase consumption because the value of wealth has increased

question

Expectations that the price level will decrease in the future will

answer

shift the current consumption function downward

question

Which of the following would not shift the consumption function?

answer

a change in disposable income

question

Which of the following will not shift the consumption function upward?

answer

expectations of lower future income

question

Which of the following would not shift the consumption function downward?

answer

a decline in business profits

question

The opportunity cost of investing in capital is the interest rate.

answer

true

question

A firm's level of investment is tied to the interest rate

answer

because the interest rate represents the opportunity cost of investing in capital

question

Which of the following would tend to shift the investment function upward?

answer

a cut in corporate taxes that raises after-tax profits

question

If autonomous investment were measured on the vertical axis and disposable income were measured on the horizontal axis, what would the graph look like?

answer

a horizontal line

question

An increase in the interest rate, other things constant, decreases the amount of investment spending

answer

True

question

If the interest rate increases, then there will be

answer

a downward shift of the autonomous investment function

question

During recession years,

answer

investment declines much faster than GDP declines

question

A household's net wealth is the value of

answer

all its assets minus the value of all its liabilities

question

Net exports

answer

decrease as real domestic income increases

question

An increase in the value of the U.S. dollar in world markets, other things constant, would increase the demand for U.S. exports.

answer

false

question

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

answer

decrease

question

The relationship between consumption and income is

answer

positive and stable

question

The economy's investment demand curve shows the inverse relationship between the quantity of investment demanded and the market interest rate, other things held constant.

answer

true

Continue to order Get a quote

ECON EXAM 3 CH. 9

Recent Posts

Recent Comments

Calculate the price of your order

Our guarantees

Money-back guarantee

Zero-plagiarism guarantee

Free-revision policy

Privacy policy

Fair-cooperation guarantee