Midterm II

# Midterm II - 1 C 2 C 3 C Midterm2 4 C 5 A April12,2010 6 A...

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1 Midterm 2 April 12, 2010 Answer Key Econ 2006 Spring 2010 Instructor: Shahram Amini 1 C 2 C 3 C 4 C 5 A 6 A 7 A 8 D 9 E 10 E 11 E 12 B 13 B 14 A 15 D 16 B 17 D 18 A 19 B 20 D 21 E 22 A 23 C 24 B 25 B 26 A 27 E 28 B 29 D 30 D 31 C 32 A 33 B 34 E 35 C 36 B 37 A 38 D 39 C 40 E

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2 1. Autonomous consumption expenditures are a. identical to induced consumption b. determined primarily by transfer payments c. not influenced by disposable income d. increasing at a decreasing rate e. increasing at an increasing rate 2. 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 3. The owners of PubFive want to borrow \$20,000 to buy four pool tables at a price of \$5,000 each. They expect to earn \$1,000 from the first one, \$800 from the second one, \$500 from the third one, and only \$400 from the fourth pool table. If the interest rate on the loan is 12%, they should buy_____ pool tables. a. 0 b. 1 c. 2 d. 3 e. 4 4. On a graph showing investment along the vertical axis and income along the horizontal axis, a. the investment line slopes downward b. the investment line would shift upward if income increased c. the investment line would shift downward if the interest rate increased d. the investment line would shift downward if income increased 5. A decrease in the value of the U.S. dollar relative to other currencies will a. shift the net export function upward b. shift the net export function downward c. cause a rightward movement along the net export function d. cause a leftward movement along the net export function e. show no movement along or shift of the net export function 6. The marginal propensity to consume (MPC) is a. the change in consumption divided by the change in disposable income b. total consumption divided by total disposable income c. the change in disposable income divided by the change in consumption d. total disposable income divided by total consumption e. the change in disposable income minus the change in consumption
3 7. Use the table below to determine the impact on consumption spending of a \$100 increase in net taxes. Disposable Consumption Income Spending \$1,000 \$ 800 2,000 1,600 3,000 2,400 a. Consumption will decrease by \$80. b. Consumption will increase by \$80. c. The marginal propensity to consume will increase to .91. d. The marginal propensity to consume will decrease to .73. e. The change in net taxes will not change consumption. 8. In the income-expenditure framework, if planned aggregate expenditures are greater than real GDP, a. the price level will fall b. consumption must fall c. inventories will increase d. inventories will decrease e. consumption will decrease 9. If the price level decreases, a. the aggregate expenditures line shifts downward; the economy moves down along the aggregate demand curve b. the aggregate expenditures line shifts upward; the economy moves up along the aggregate

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Midterm II - 1 C 2 C 3 C Midterm2 4 C 5 A April12,2010 6 A...

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