1.
The most important determinant of consumer spending is:
A.
the level of household debt.
B.
consumer expectations.
C.
the stock of wealth.
D.
the level of income.
2.
With an MPS of .4, the MPC will be:
1.0 minus .4.
.4 minus 1.0.
the reciprocal of the MPS.
.4.
3.
Answer the next question(s) on the basis of the following consumption schedule:
Disposable income Consumption $200 $205 225 225 250 245 275 265 300 285
Disposable income
Consumption
$200
$205
225
250
245
275
265
300
285
R-1 REF09077
Refer to the above data. The marginal propensity to consume is:
.25
.75.
.20.
.80.
4.
Answer the next question(s) on the basis of the following consumption schedule: Disposable income Consumption $200 $205 225 225 250 245 275 265 300 285
Refer to the above data. At the $200 level of disposable income:
the marginal propensity to save is 2 .5
dissaving is $5.
the average propensity to save is .20.
the average propensity to consume is .80.
5.
The multiplier is useful in determining the:
full-employment unemployment rate.
level of unintended investment or disinvestment.
rate of inflation.
change in equilibrium GDP resulting from a change in spending.
6.
If 100 percent of any change in income is spent, the multiplier will be:
equal to the MPC.
zero.
infinitely large.
7.
The complex multiplier is:
larger than the simple multiplier because the latter embodies fewer leakages.
larger than the simple multiplier because the latter embodies more leakages.
smaller than the simple multiplier because the latter embodies fewer leakages.
smaller than the simple multiplier because the latter embodies more leakages.
8.
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.
9.
The numerical value of the multiplier will be smaller the:
larger the average propensity to consume.
larger the slope of the saving schedule.
larger the slope of the consumption schedule.
smaller the slope of the saving schedule.
10.
The practical significance of the multiplier is that it:
brings about an equality of planned investment and saving.
magnifies relatively small initial changes in spending into larger changes in GDP.
keeps inflation within tolerable limits.
helps to stabilize the economy.