The marginal propensity to consume is always
a. a negative number
b. larger than 1.0
c. larger than 10
d. greater than zero and less than 0.5
e. greater than zero and less than 1.0
If the reserve requirement is 0.2 and demand deposits are $800 (assume no earlier
loans), the banks can lend out
a. $800
b. $80
c. $640
d. $160
e. $960
The consumption function shows
a. the relationship between consumption and saving
b. the relationship between consumption and real disposable income
c. the relationship between consumption and real income
d. the relationship between consumption and nominal income
e. the relationship between total consumption and consumption for durable goods
Existing computer software
Higher productivity is the most direct route to higher living standards.
If the MPC is 0.6 and if government purchases and net taxes both increase by $20
billion, by how much will equilibrium output change?
a. It will increase by $80 billion.
b. It will increase by $20 billion.
c. It will not change because the changes in government purchases and net taxes will
cancel each other out.
d. It will decrease by $20 billion.
e. It will decrease by $80 billion.
The most recent recession in the United States began in December 2007.
Which of the following describes the correct relationship among the nominal interest
rate, the real interest rate, and the inflation rate?
a. Real interest rate = nominal interest rate + inflation rate
b. Real interest rate = nominal interest rate – inflation rate
c. Nominal interest rate = real interest rate – inflation rate
d. Inflation rate = real interest rate – nominal interest rate
e. Inflation rate = nominal interest rate + real interest rate
If the MPC is 0.8 and net taxes increase by $100 billion, what is the effect on
equilibrium output?
a. There is no effect; equilibrium output is not affected by a change in net taxes.
b. Equilibrium output will fall by $80 billion.
c. Equilibrium output will fall by $125 billion.
d. Equilibrium output will fall by $400 billion.
e. Equilibrium output will fall by $500 billion.
How can the Fed reduce a continuing inflation?
a. By slowing the continuing downward shift of the aggregate supply curve
b. By increasing the money supply
c. By slowing the continuing leftward shift of the aggregate demand curve
d. By decreasing the required reserve ratio
e. By slowing the continuing rightward shift of the aggregate demand curve.
Which of the following is a definition of the consumption function?
a. A functional relationship between real consumption spending and real disposable
income
b. A functional relationship between real consumption spending and the interest rate
c. A functional relationship between real consumption spending and wealth
d. A functional relationship between real consumption spending and total spending
e. A functional relationship between real consumption spending and net taxes
In figure 14-1, which area represents total net benefits gained in the market
Along a perfectly elastic supply curve