Macro Chapter 10

Personal saving is equal to:

Disposable income minus consumption.

The amount of consumption in an economy correlates:

Directly with the level of disposable income

When a consumption schedule is plotted as a straight line, the slope of the consumption line is:

Less than the slope of the 45 (degree) line.

When the consumption schedule is plotted on a graph:

Consumption is on the vertical axis and disposable income is on the horizontal axis

At income level 3, the amount of saving is represented by the line segment:

FG

Disposable income equals consumption at point:

D

As income falls from level 3 to level 2, the amount of:

Consumption decreases and the amount of saving decreases

The slope of the consumption schedule between two points is :

The ratio of the change in consumption to the change in disposable income between those two parts

The fraction, or percentage of total income which is consumed is called the:

Average prospensity to consume

If there is a decrease in disposable income in an economy, then:

The APC rises and the APS Falls

If disposable income is $900 billion when the average prosperity to consume is .09, it can be concluded that:

saving is $90 billion

Assume that an increase in a household’s disposable income from 40,000 to 48,000 leads to an increase in consumption from 35,000 to 41,000, then the:

Slope of the consumption schedule is .75

If Matt’s disposable income increases from 4,000 to 4,500 and his levels of saving increases from $200 to $325, it may be concluded that his marginal propensity to:

consume is .75

If the consumption schedule is a straight line, it can be concluded that the :

MPC is constant at various levels of income

If disposable income increases from 912 to 927 billion and MPC= 0.6, then consumption will increase by:

$9 billion

If disposable income decreases from 1800 to 1500 and MPC=0.75, then saving will:

decrease by $75

If the slope of linear consumption schedule increases in a private closed economy, then it can be concluded that the:

MPC has increased

The relationship between the MPS and the MPC is such that:

1- MPC=MPS

The saving schedule shows the relationship of saving of households to the level of:

Disposable income

Dissaving occurs when:

Income is less than consumption

The break even income would be level

2

The fraction,or percentage of total income which is saved is called the

Average propensity to save

If the slope of consumption schedule is 0.75, then the slope of the saving schedule is

0.25

In an economy , for every $10 million increase in disposable income, saving increases by $2 million. It can be concluded that the

Slope of the consumption schedule is .8

When the marginal propensity to consume is less than 1, the

Marginal propensity to save is positive

In a private closed economy, national income is$4.5 trillion and savings equals $6.4 billion. Based on this data, the marginal propensity to consume

cannot be calculated from the data given

At the $300 level of disposable income

There is a dissaving of $10

The marginal propensity to consume is

.60

if disposable income is $550, we would expect the consumption to be

$46

At $320 billion level of disposable income, the average propensity to save is

.075

If consumption increases by $10 billion at each level of disposable income, the marginal propensity to consume will:

not change, but the average propensity to consume will change.

The ratio LM/PL would be a measure of the

Marginal propensity to consume

The marginal propensity to consuke is represented by

GE/AB

If the consumption schedule shifts downward, and the shift was not caused by a tax change , then the saving schedule

will shift upward.

An increase in household wealth that creates a wealth effect would shift the

consumption schedule upward and the saving schedule downward.

Which of the following would shift the saving schedule upward?

A decrease in wealth.

The saving schedule would be shifted upward by

A decrease in taxes

As the consumption and saving schedules relate to real GDP, an increase in taxes will shift

Downward both the consumption and saving schedules

A lower real interest rate typically induces consumers to

purchase more goods that are brought using credit

A change in the amount saved due to the change in income is represented by a

movement along the saving schedule

line A2 shifts to A3 because of the so called wealth effect, then in figure (B) line

B2 will shift to B1

Consumption shifts from A2 to Aa3 because of a change in taxes, then in figure (B) line:

B1 will shift to B3

The Great Recession of 2007-2009 altered the prior behavior of consumers in the economy by

shifting the consumption schedule down

The Paradox of Thrift highlights the idea that

Saving more can be bad for the economy during a recession

Given the expected rate of return on all possible investment opportunities in the economy, a

decrease in the real rate of interest will tend to increase the level of investment.

If the real interest rate increases

There will be a movement upward along the investment demand curve.

A firm invest in a new machine that cost 2,000……an increase in total revenue of 2,200 a year…. The current real rate is 7 percent the firm should:

Undertake the investment because the expected rate of return of 10 percent is greater than real rate of interest.

According to the cumulative investment table `

$40 billion worth of investments have expected rates of return 20% and 22%

If the real rate falls from 20% to 16% then

$30 billion of additional investments will be undertaken

The investment demand curve is drawn with the amount of investment on the

horizontal axis and the expected rate of return and interest rate on the vertical axis