CH 27 QUIZ ECONO

# CH 27 QUIZ ECONO - 1 The 45-degree line on a graph relating...

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1. The 45-degree line on a graph relating consumption and income shows: all points where the MPC is constant. all points at which saving and income are equal. all the points at which consumption and income are equal. the amounts households will plan to save at each possible level of income. ( 1 ) 2. The MPC can be defined as that fraction of a: change in income that is not spent. change in income that is spent. given total income that is not consumed. given total income that is consumed. ( 1 ) 3. The consumption schedule relates: consumption to the level of disposable income. saving to the level of disposable income. disposable income to domestic income. consumption to saving. ( 1 ) 4. The APC is calculated as: change in consumption / change in income. consumption / income. change in income / change in consumption. income / consumption. ( 1 ) 5. Which of the following is correct ? APC + APS = 1. APC + MPS = 1. APS + MPC = 1. APS + MPS = 1. ( 1 ) 6. If the marginal propensity to consume is .9, then the marginal propensity to save must be: 1. .1. 1.1. .9.

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( 1 ) 7. Refer to the above data. The marginal propensity to consume is: .25. .75. .20. .80. ( 1 ) 8. The multiplier is: 1/MPC. 1/(1 + MPC). 1/MPS. 1/(1 MPS). ( 0 ) 9. If the MPC is .70 and gross investment increases by \$3 billion, the equilibrium GDP will: increase by \$10 billion. increase by \$2.10 billion. decrease by \$4.29 billion. increase by \$4.29 billion. ( 1 ) 10. The practical significance of the multiplier is that it: equates the real interest rate and the expected rate of return on investment. magnifies initial changes in spending into larger changes in GDP. keeps inflation within tolerable limits. helps to stabilize the economy. ( 1 ) 11. If the MPC is .6, the multiplier will be: 4.0. 6.0. 2.5. 1.67. ( 0 ) 12. If the marginal propensity to save is 0.2 in an economy, a \$20 billion rise in investment spending will increase:
GDP by \$120 billion. GDP by \$20 billion. saving by \$25 billion. consumption by \$80 billion. ( 0 ) 13. Answer the next question(s) on the basis of the following table that illustrates the multiplier process. Refer to the above table. The marginal propensity to consume is: .5. .75. .8. .9. ( 0 ) 14. Answer the next question(s) on the basis of the following table that illustrates the multiplier process. Refer to the above table. The marginal propensity to save is: .5. .25. .2. .1. ( 0 ) 15. The multiplier applies to:

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investment but not to net exports or government spending. investment, net exports, and government spending. increases in spending but not to decreases in spending. spending by the private sector but not by the public sector 1. The most important determinant of consumption and saving is the: level of bank credit. level of income.
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## This note was uploaded on 11/22/2010 for the course ECON 564 taught by Professor Dr.hurst during the Spring '08 term at El Centro College.

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CH 27 QUIZ ECONO - 1 The 45-degree line on a graph relating...

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