Question

1.Which of the following is a true statement about the multiplier? *

The multiplier effect does not occur when autonomous expenditures decrease

The multiplier is a value between zero and one

The smaller the MPC, the larger the multiplier

The multiplier rises as the MPC rises

2.According to the Keynesian model of the macroeconomic, the most effective means for closing a recessionary gap is *

Decrease in marginal tax rates which shift SRAS

Increases in government spending which shift AD

Patience, the economy will correct itself

Lowering the growth rate of the money supply to shift LRAS

3.The aggregate consumption function is C = 200 + 0.9Y. The equation for the aggregate saving function is *

S = 200 – 0.1Y

S= –200 – 0.1Y

S = 200 – 0.9Y

S = –200 + 0.1Y

4.The Multiplier is: *

Changes in consumption, investment, and government purchases will change aggregate demand

Changes in consumption, investment, and government purchases will change total expenditures

A change in autonomous spending will bring about a multiple change in total spending

A rise in C, I, or G will shift the TE curve upward

5.In a closed economy, aggregate demand is the sum of: *

Consumer expenditure, actual investment spending, government spending and net exports

Consumer expenditure, planned investment spending, and government spending

Consumer expenditure, actual investment spending, government spending, and net exports

Consumer expenditure, planned investment spending, government spending, and net exports

6.The formula for the expenditure multiplier is *

1/MPS

1/MPC

1/(1+MPS)

1

7.The consumption function describes the relationship between: *

Consumption spending and disposable income

Consumption spending and national income

Consumption spending and personal income

Consumption spending and aggregate income

8.Which of the following statements is FALSE? *

Disposable income - saving = consumption expenditure

Consumption expenditure + saving = disposable income

Saving = disposable income - consumption expenditure

Consumption expenditure = saving - disposable income

Answer 1