Post on 02-Jan-2016
transcript
Chapter 8 Review
Macroeconomic Measurement&
Basic Concepts
With an MPS of .5, the MPC will be:
• 1.0 minus .
The most important determinant of consumption and saving is:
• level of .
As disposable income goes up the
• APC .
Which fiscal policy actions would be most effective in combating a recession
• Taxes . • Government Spending .
The consumption schedule relates:
• consumption to the level of .
The consumption schedule in the diagram indicates that:
• up to a point consumption income, but then falls below income.
APC + APS =
• .
The sector of the economy that is responsible for Consumption is:
• the sector
The relationship between consumption and disposable income is such that:
• a direct and relatively stable relationship exists between and .
If the Government increases Government Purchases by $800 billion dollars and increases taxes by $800 billion dollars the effect on GDP will be
• .
If the marginal propensity to consume is three quarters, then an increase in personal income taxes of $100 will most likely result in
• a decrease in consumption of and a decrease in savings of .
The spending multiplier will have an effect on any new, additional spending in the component(s) of
• and Purchases
• MPC is greater in than in .
If X’s MPC is .70, this means that X will:
• spend of any increase in its disposable income.
Dissaving occurs where:
• consumption income.
The saving schedule is drawn on the assumption that as income increases:
• saving will increase and as a percentage of .
If the marginal propensity to consume is .9, then the marginal propensity to save must be:
• .
The greater is the marginal propensity to consume, :
• The is the marginal propensity to save.
In the late 1990s the U.S. stock market boomed, causing U.S. consumption to rise.
• effect.
The wealth effect is shown graphically as a:
• shift of the consumption schedule.
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Marginal propensity to save (MPS)
=change in saving
change in income
Marginal propensity to consume (MPC)
=change in consumption
change in income
The investment demand slopes downward and to the right because lower real interest rates:
• enable more projects to be undertaken profitably.
An increase in the real rate of interest will
• the level of investment.
The investment demand curve suggests:
• there is an relationship between the real rate of interest and the level of investment spending.
A decrease in corporate income taxes will:
• shift the investment-demand curve to the .
Investment spending in the United States tends to be unstable because:
• profits are highly .
• Capital goods, because their purchases can be postponed like consumer goods, tend to contribute to in investment spending.
The multiplier is:
• 1/ .Or • 1/(1 - )
• Which economy has the highest marginal propensity to consume?
• • Which economy has the largest multiplier?
The practical significance of the multiplier is that it:
• initial changes in spending into larger changes in .
If the MPC is 0.75 and gross investment increases by $8 billion, GDP will increase by
• $ billion.