Question 1
Suppose the government is current running a budget deficit. Everything else held constant, if the government raises taxes this will __ the budget deficit (in absolute value terms).
Question 1 options:
decrease
increase
Question 2
Suppose Brandon buys a bond issued by the US government. The bond is an asset for _ and a liability for __.
Question 2 options:
Brandon; Brandon
US government; US government
US government; Brandon
Brandon; US government
Question 3
Suppose the US government issues a bond that has a face value of $2000, a coupon rate of 10%, and matures in 3 years. Everything else held constant, the bond holder can expect to receive a payment of $______ in 3 years.
Question 3 options:
$2,200
$2,000
$1,800
$200
Question 4
Suppose that for every additional $1000 in disposable income, consumer spending rises by $900. The marginal propensity to consume is _ and the marginal propensity to save is __.
Question 4 options:
$100; $900
$900; $100
0.9; 0.1
0.1; 0.9
Question 5
If the marginal propensity to consume is 0.8, then the marginal propensity to save is _ and the multiplier is __.
Question 5 options:
0.2; 1.25
0.2; 5
0.8; 5
0.8; 1.25
Question 6
If the marginal propensity to consume is 0.9, then the marginal propensity to save is _ and the multiplier is __.
Question 6 options:
0.9 10
0.9; 1.11
0.1; 1.11
0.1; 10
Question 7
As the marginal propensity to consume rises, the multiplier __.
Question 7 options:
rises
falls
Question 8
Suppose the marginal propensity to consume in an economy is 0.9. Everything else held constant, suppose there is a decrease in autonomous investment spending of $20 million. This will cause aggregate output (real GDP) to _ by _.
Question 8 options:
increase; $200 million
decrease; $200 million
increase; $20 million
decrease; $20 million
Question 9
Assume aggregate consumer spending equals $3,000 when aggregate disposable income is zero, and when disposable income increases from $100 to $200, consumer spending increases by $60. Which of the following is the equation for the aggregate consumption function?
Question 9 options:
c = $3000 + 0.3(disposable income)
c = $200 + 0.6(disposable income)
c = $100 + 0.3(disposable income)
c = $3000 + 0.6(disposable income)
Question 10
Suppose there is an increase in expected future income. Everything else held constant, this will change the _ and the consumption function will .
Question 10 options:
autonomous consumption component; shift down
autonomous consumption component; shift up
marginal propensity to consume; shift down
marginal propensity to consume; shift up
Sample Solution
