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Chapter 10 - Basic Macroeconomic Relationships
142. The multiplier is defined as:
143. The above figure shows the saving schedules for economies 1, 2, 3, and 4. Which
economy has the highest marginal propensity to consume?
Chapter 10 - Basic Macroeconomic Relationships
144. The above figure shows the saving schedules for economies 1, 2, 3, and 4. Which
economy has the largest multiplier?
145. If 100 percent of any change in income is spent, the multiplier will be:
146. The multiplier can be calculated as:
Chapter 10 - Basic Macroeconomic Relationships
147. The size of the multiplier is equal to the:
148. If the MPS is only half as large as the MPC, the multiplier is:
149. If the MPC is .70 and investment increases by $3 billion, the equilibrium GDP will:
Chapter 10 - Basic Macroeconomic Relationships
150. The numerical value of the multiplier will be smaller the:
151. The practical significance of the multiplier is that it:
152. If the MPC is .6, the multiplier will be:
Chapter 10 - Basic Macroeconomic Relationships
153. Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP
will increase by:
154. The multiplier applies to:
155. The multiplier effect indicates that:
Chapter 10 - Basic Macroeconomic Relationships
Answer the question on the basis of the following table that illustrates the multiplier process.
156. Refer to the above table. The marginal propensity to consume is:
157. Refer to the above table. The marginal propensity to save is:
Chapter 10 - Basic Macroeconomic Relationships
158. Refer to the above table. The change in income in round two will be:
159. Refer to the above table. The total change in income resulting from the initial change in
investment will be:
160. Refer to the above table. The total change in consumption resulting from the initial
change in investment will be:
Chapter 10 - Basic Macroeconomic Relationships
161. Refer to the above table. The multiplier in this economy is:
162. If a $200 billion increase in investment spending creates $200 billion of new income in
the first round of the multiplier process and $160 billion in the second round, the multiplier in
the economy is:
163. If a $50 billion decrease in investment spending causes income to decline by $50 billion
in the first round of the multiplier process and by $25 in the second round, the multiplier in
the economy is:
Chapter 10 - Basic Macroeconomic Relationships
164. If a $100 billion decrease in investment spending causes income to decline by $100
billion in the first round of the multiplier process and by $75 billion in the second round,
income will eventually decline by:
165. 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:
166. If the marginal propensity to save is 0.2 in an economy, a $20 billion rise in investment
spending will increase:
Chapter 10 - Basic Macroeconomic Relationships
167. A $1 billion increase in investment will cause a:
168. The actual multiplier effect in the U.S. economy is less than the multiplier effect in the
text examples because:
169. (Consider This) During the Great Recession of 2007-2009, both real interest rates and
investment spending declined. This suggests that:
Chapter 10 - Basic Macroeconomic Relationships
170. (Consider This) During the Great Recession of 2007-2009:
171. (Last Word) Art Buchwald's article "Squaring the Economic Circle" is a humorous
description of:
172. (Last Word) Art Buchwald's article "Squaring the Economic Circle" humorously
describes how:
Chapter 10 - Basic Macroeconomic Relationships
173. If DI is $275 billion and the APC is 0.8, we can conclude that saving is $55 billion.
174. If the MPC is constant at various levels of income, then the APC must also be constant at
all of those income levels.
175. The average propensity to consume is defined as income divided by consumption.
176. 1 - MPC = MPS.
Chapter 10 - Basic Macroeconomic Relationships
177. If the Hennige family's marginal propensity to consume is 0.70, then it will necessarily
consume seven-tenths of its total income.
AACSB: Analytic
Bloom's: Level 3 Apply
Difficulty: 2 Medium
Learning Objective: 10-01 Describe how changes in income affect consumption (and saving).
Topic: Income-consumption and income-savings relationships
178. 1 + MPS = MPC.
179. The slope of the consumption schedule is measured by the MPC.
180. A decline in the real interest rate will shift the investment demand curve to the right.
Chapter 10 - Basic Macroeconomic Relationships
181. A specific investment will be undertaken if the expected rate of return, r, exceeds the
interest rate, i.
182. Investment is highly stable; it increases over time at a very steady rate.
183. The greater the MPC, the greater the multiplier.
184. The multiplier is equal to the reciprocal of the MPC.
Chapter 10 - Basic Macroeconomic Relationships
185. The multiplier shows the relationship between changes in a component of spending, say,
investment, and the consequent changes in real income and output.
186. Economists widely agree that the value of the real-world multiplier is 2.5.
187. If the MPC is .9 and investment spending increases by $20 billion, real GDP will
increase by $200 billion.
