Question

23-The relationship between households' planned consumption expenditures and households' level of disposable real income is called

		the investment function.
		the savings function.
		the household aggregate demand function.
		the consumption function.

25-Of the relationships below, which is the least stable?

		Investment
		Net exports
		Consumption
		Saving

28-In the multiplier process successive rounds of spending get smaller and smaller because the

		mps equals 0.
		mps is negative but less than -1.
		mps is positive and equals 1.
		mps is positive and less than 1.

29-The expression 1/MPS is defined as

		the inverse of the multiplier.
		the multiplier.
		autonomous consumption.
		one minus the multiplier.

34-If the crowding-out effect is complete, then an increase in government spending of $100 billion will generate how much more real GDP? (Assume a marginal propensity to save of 0.25.)

		$400 billion
		$25 billion
		0
		$100 billion

38-The time that elapses between the implementation of a policy and its intended result is referred to as

		the effect time lag.
		the recognition time lag.
		the action time lag.
		the data lag.

39-

Automatic stabilizers are fiscal policy measures that

		are determined by the Federal Reserve System.
		are part of discretionary fiscal policy.
		must be determined by the Congress in each budget.
		do not require new legislation.

40-Fiscal policy during periods of relatively low unemployment and low inflation have

		little effect due to time lags and the crowding-out effect.
		little effect because the global market makes up fifty percent of aggregate spending.
		significant effect due to the timely intervention of the president and congress.
		significant effect because the changes in fiscal policy gives investors confidence in the economy.

Answer 1

23)  the consumption function. ( C = a + b Y ) Y = disposable income ; a = autonomous consumption ; b = MPC .

25) Investment and net exports are extremely volatile . Of these investment can be counted as least stable . Investment varies greatly with monetary policies and business cycles . Investment .

28) Value of multiplier = 1 / ( 1 - MPC ) . 0< MPC < 1 . mps is positive and less than 1 .

29) the multiplier. Multiplier = 1 / ( 1- MPC ) . MPC + MPS = 1