Econ Study Guide Help!!

Johnstate402 SG

1)As disposable income increases, consumption spending

a. increases by the same amount

b. decreases by the same amount

c. increases by less than the increase in disposable income

d. decreases by less than the increase in disposable income

e. does not change at all

2) Disposable income is equal to consumption

a. plus investment

b. plus taxes

c. plus saving

d. minus taxes

e. minus saving

3) Sarah moves from Upperland, which has no taxes or transfer payments, to Lowerland, where she is hit with taxes of $2,000 and receives transfer payments of $3,000. She earns the same wage in both countries, but in Lowerland her disposable income is

a. $1,000 higher

b. $1,000 lower

c. $5,000 higher

d. $2,000 lower

e. $3,000 higher

4) Induced saving

a. is that part of saving that is inversely related to the interest rate

b. plus autonomous saving equals disposable income

c. is that portion of saving that is directly related to income

d. is less than disposable income at every level of income

e. equals autonomous saving at every income level

5) Consumption spending depends mainly on the level of

a. national income

b. disposable income

c. personal income

d. personal income taxes

e. imports

6) 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

a. marginal propensity to consume is 0.86

b. marginal propensity to consume is 0.99

c. marginal propensity to consume is 0.98

d. marginal propensity to save is 0.01

e. marginal propensity to save is 0.86

7) Suppose that when disposable income rises from $3 trillion to $3.2 trillion, consumption rises from $2.5 trillion to $2.6 trillion. What is the marginal propensity to save?

a. 0.1

b. 0.2

c. 0.5

d. 0.8

e. 0.9

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

a. $25

b. $66.66

c. $50

d. $33.33

e. $75

9) The slope of the consumption function shows how

a. consumption changes over time

b. consumption changes as household size changes

c. consumption changes as the price level changes

d. income changes as the level of consumption changes

e. consumption changes as the level of income changes

10) An upward shift of the consumption function might be caused by

a. an increase in disposable income

b. a decrease in disposable income

c. a decrease in the price level

d. a decrease in household wealth

e. an increase in the interest rate

11) A decrease in net wealth will

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 income

12) A decrease in the price level will

a. shift the consumption function upward

b. make the consumption function steeper

c. result in a movement upward along the consumption function

d. result in a movement downward along the consumption function

e. have no effect on the consumption function

13) A household that expects a decrease in disposable income in the future will

a. increase its current consumption spending

b. decrease its current consumption spending

c. maintain its current consumption spending

d. increase its current consumption spending, then increase spending when income falls

e. decrease its current consumption spending, then increase spending when income falls

14) According to the life-cycle model,

a. saving increases over the typical individual's lifetime

b. consumption decreases over the life cycle as individual save more for retirement

c. people with high incomes save a smaller fraction of their incomes than do people with low income

d. saving and consumption tend to vary in a systematic way over an individual's lifetime

e. the saving rate for an economy as a whole increases over its lifetime

15)Which of the following is not investment spending?

a. an increase in business inventories

b. the extensive renovation of an old factory building

c. the purchase of stock in Potomac Electric Company

d. the construction of a new apartment building

e. the purchase of a new silo for a farm

16) A grocery store manager has $600 in cash with which to buy a rug cleaner. Rental income from the cleaner would be about $75 per year. The interest rate is 11 percent. Should the manager buy the machine?

a. Yes, since the rate of return is greater than the rate of interest.

b. Yes, since the manager does not have to borrow the money the interest rate is irrelevant.

c. No, since the yield of $75 is less than the interest cost of 11 percent.

d. No, since the rate of return is less than the interest rate.

e. Yes, since the return of $75 is greater than 11 percent.

Help would be greatly apprecitated!