Pre-Test Chapter 8 ed17

# Pre-Test Chapter 8 ed17 - Pre-Test Chapter 8 ed17 Multiple...

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Prof Keep Econ Chap 8 ed 17 Pre-Test Chap 8 Page 1 of 7 Pre-Test Chapter 8 ed17 Multiple Choice Questions 1. 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. 2. As aggregate income decreases, the APC: A. and APS will both increase. B. will decrease, but the APS will increase. C. will increase, but the APS will decrease. D. and APS will both decrease. 3. Refer to the above diagram. The average propensity to consume: A. is greater than 1 at all levels of disposable income above \$100. B. is greater than 1 at all levels of disposable income below \$100. C. is equal to the average propensity to save. D. cannot be determined from the information given. 4. At the point where the consumption schedule intersects the 45-degree line: A. the MPC equals 1. B. the APC is zero. C. saving equals income. D. saving is zero.

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Prof Keep Econ Chap 8 ed 17 Pre-Test Chap 8 Page 2 of 7 5. Assume there are no prospective investment projects (I) that will yield an expected rate of return (r) of 25 percent or more, but that there are \$5 billion of investment opportunities with an expected rate of return between 20 and 25 percent, an additional \$5 billion between 15 and 20 percent, and so on. If the real interest rate is 15 percent in this economy, the aggregate amount of investment will be: A. \$25. B. \$20. C. \$15. D. \$10. 6. Refer to the above figure. If the relevant saving schedule were constructed: A. saving would be minus \$20 billion at the zero level of income. B. aggregate saving would be \$60 at the \$60 billion level of income. C. its slope would be 1/2. D. it would slope downward and to the right 7. If a \$500 billion increase in investment spending increases income by \$500 billion in the first round of the multiplier process and by \$450 in the second round, income will eventually increase by: A. \$2500 billion. B. \$3000 billion.
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Pre-Test Chapter 8 ed17 - Pre-Test Chapter 8 ed17 Multiple...

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