____ 1. The fraction
or percentage of total income which is consumed
is called the:
A. break-even income.
B. consumption schedule.
C. average propensity to consume.
D. marginal propensity to consume.
____ 2. When the marginal
propensity to consume is less than 1, the:
A. average propensity to consume is greater than 1.
B. average propensity to save is less than 1.
C. marginal propensity to save is negative.
D. marginal propensity to save is positive.
____ 3. Which of the
following would shift the consumption schedule
downward?
A. a falling level of consumer debt
B. expectations of rising prices
C. an increase in real and financial assets
D. an increase in taxes
____ 4. The multiplier
effect:
A. dissipates large changes in spending into smaller changes in output
and income.
B. lessens upswings and downswings in business activity.
C. reduces the MPC.
D. magnifies small changes in spending into larger changes in output and
income.
____ 5. An exchange
rate:
A. is the ratio of the dollar volume of a nation’s exports to the dollar
value of its imports.
B. measures the interest rate ratios of any two nations.
C. is the price at which the currencies of any two nations exchange for
one another.
D. is the amount which one nation must export to obtain $1 worth of imports.
____ 6. The horizontal
range of the aggregate supply curve:
A. assumes constant resource prices.
B. implies that output could be increased without increasing the price
level.
C. assumes there are unemployed resources in the economy.
D. entails all of the above.
____ 7. An increase
in aggregate expenditures resulting from some factor other than a change
in the price
level is equivalent
to:
A. a leftward shift of the aggregate demand curve in the AD-AS model.
B. a rightward shift of the aggregate demand curve in the AD-AS model.
C. a movement downward along a fixed aggregate demand curve in the AD-As
model.
D. a decrease in aggregate supply in the AD-As model.
____ 8. The wealth,
interest rate, and foreign purchases effects all help explain:
A. shifts in the aggregate demand curve.
B. shifts in the aggregate supply curve.
C. why the aggregate demand curve is downward sloping.
D. why the aggregate supply curve is upward sloping.
____ 9. The power of
the multiplier associated with an initial increase in spending will be:
A. zero if any increase in price level occurs.
B. enhanced if inflation occurss
C. the same whether or not inflation occurs.
D. diminished if inflation occurs.
____ 10. If AD intersects
the AS curve in the AS curve’s intermediate range, an increase in AD will
cause:
A. lower prices and higher unemployment.
B. a higher price level and higher unemployment.
C. higher prices and no change in employment.
D. a higher price level and lower unemployment.
____ 11. Which factor
explains the variability of investment?
A. the regularity of innovation.
B. the constancy of expectations.
C. the durability of capital goods.
D. the consistency of profits.
Answers:
1.C 2.D 3.D 4.D 5.C 6.D 7.B 8.C 9.D 10.D 11.C