# Macroeconomics - Chapter 10

40 Questions | Total Attempts: 258  Settings  .

• 1.
The most important determinant of consumer spending is
• A.

The level of household borrowing

• B.

Consumer expectations

• C.

The stock of wealth

• D.

The level of income

• 2.
The most important determinant of consumption and saving is the
• A.

Level of bank credit

• B.

Level of income

• C.

Interest rate

• D.

Price level

• 3.
If Carol's disposable income increases from \$1200-\$1700 and her level of saving increases from minus \$100 to a plus \$100 per marginal propensity to
• A.

Save is 3/5

• B.

Consume is one half

• C.

Consume is 3/5

• D.

Consume is 2/5

• 4.
With a marginal propensity to save of .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

• 5.
The MPC can be defined as that fraction of a
• A.

Change in income that is not spent

• B.

Change in income that is spent

• C.

Given total income that is not consumed

• D.

Given total income that is consumed

• 6.
The 45° line on a graph relating consumption and income shows
• A.

All the points where the MPC is constant

• B.

All the points at which saving and income are equal

• C.

All the points at which consumption and income is equal

• D.

The amounts households will plan to say that each possible level of income

• 7.
As disposable income goes up, the
• A.

Average propensity to consume falls

• B.

Average propensity to save falls

• C.

Volume of consumption declines absolutely

• D.

Volume of investment to diminishes

• 8.
The consumption schedule shows
• A.

That the MPC increases in proportion to GDP

• B.

That households consume more when interest rates are low

• C.

That consumption depends primarily on the level of business investment

• D.

The amounts households intend to consume at various possible levels of aggregate income

• 9.
The consumption schedule directly relates
• A.

Consumption to the level of disposable income

• B.

Saving to the level of disposable income

• C.

Disposable income to disposable income

• D.

Consumption to saving

• 10.
A decline in disposable income
• A.

Increases consumption by moving upward along a specific consumption schedule

• B.

Decreases consumption because it shifts the consumption schedule downward

• C.

Decreases consumption by moving downward along a specific consumption schedule

• D.

Increases consumption because it shifts the consumption schedule upward

• 11.
The APC is calculated as
• A.

Change in consumption/change in income

• B.

Consumption/income

• C.

Change in income/change in consumption

• D.

Income/consumption

• 12.
The consumption schedule shows
• A.

A direct relationship between aggregate consumption and accumulated wealth

• B.

A direct relationship between aggregate consumption and aggregate income

• C.

An inverse relationship between aggregate consumption and accumulated financiaal wealth

• D.

An inverse relationship between aggregate consumption and the price level

• 13.
The APC can be defined as the fraction of a
• A.

Change in income that is not spent

• B.

Change in income that is spent

• C.

Specific level of total income that is not consumed

• D.

Specific level of total income that is consumed

• 14.
The consumption schedule indicates that
• A.

Consumers will maximize their satisfaction where the consumption schedule and 45° line intersect

• B.

Up to a point, consumption exceeds income but then falls below income

• C.

The MPC falls as income increases

• D.

Households consume as much as they earn

• 15.
The consumption schedule is drawn on the assumption that as income increases, consumption will
• A.

Be unaffected

• B.

Increase absolutely but remain constant as a percentage of income

• C.

Increase absolutely but decline as a percentage of income

• D.

Increase both absolutely and as a percentage of income

• 16.
Which of the following is correct
• A.

APC plus APS equals one

• B.

APC plus MPS equals one

• C.

APS plus MPC equals one

• D.

APS plus MPS equals one

• 17.
The consumption schedule is such that
• A.

Both the APC and the MPC increase as incomes rise

• B.

The APC is constant and the MPC declines as income rises

• C.

The MPC is constant and the APC declines as income rises

• D.

The MPC and the APC must be equal at all levels of income

• 18.
The consumption and saving schedules reveal that the
• A.

MPC is greater than zero but less than one

• B.

MPC and APC are equal at the point where the consumption schedules intersects the 45° line

• C.

APS is positive at all income levels

• D.

MPC is equal to or greater thaan one at all income levels

• 19.
The size of the MPC is assumed to be
• A.

Less than zero

• B.

Greater than one

• C.

Greater than zero but less than one

• D.

Two or more

• 20.
As disposable income increases, consumption
• A.

And saving both increase

• B.

And saving both decrease

• C.

Decreases and saving increases

• D.

Increases and saving decreases

• 21.
The relationship between consumption and disposable income is such that
• A.

An inverse and stable relationship exists between consumption and income

• B.

A direct, but very volatile, relationship exists between consumption and income

• C.

A direct and relatively stable relationship exists between consumption and income

• D.

The two are usually equal

• 22.
If the MPC is .8 to and disposable income is \$200, then
• A.

Consumption and saving cannot be determined from the information given

• B.

Saving will be \$20

• C.

Personal consumption expenditures must be \$160

• D.

Saving will be \$40

• 23.
The MPC for an economy is
• A.

The slope of the consumption schedule or line

• B.

The slope of the saving schedule or line

• C.

One divided by the slope of the consumption schedule or line

• D.

One divided by the slope of the savings schedule or line

• 24.
In contrast to investments, consumption is
• A.

Relatively unstable

• B.

Relatively stable

• C.

Measurable

• D.

Unmeasurable

• 25.
Assume the following consumption schedule C= 20 + .9Y, where C is consumption and why is disposable income. The MPC is
• A.

.45

• B.

.20

• C.

.50

• D.

.90

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