Question

If nothing else changes, an increase in interest rates will __________.

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A raise investment spending because it raises the expected returns

B lower investment spending because it raises the opportunity cost of funds

C lower consumption spending because it reallocates funds toward investment

D have no effect on aggregate expenditures

Even though I lost my job, causing my income to drop significantly, I still continued to pay my rent. This spending is an example of _____________.

A autonomous consumer spending

B investment spending

C induced consumer spending

D spending based on expectations

What is the primary determinant of government spending?

A Interest rates

b Current income

c Inflation levels

d Politics

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If inventories are rising, we can assume that which of the following is true?

.A Consumption and investment is greater than production, suggesting output will rise

b Production is greater than consumption and investment, suggesting output will fall

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Which of the following would likely cause a decrease in consumption in the economy?

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aAn increase in expected income

bA fall in income tax rates

cA rise in expected income

dAn increase in interest rates

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Which item is included in the calculation of U.S. GDP?

A New housing construction

B Transfer payments

C Intermediate goods

D Purchases of used cars by consumers

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If aggregate expenditure is greater than real GDP, we could expect which of the following to occur?

A Inventories to decline and real GDP to increase in the future

B Inventories to increase and real GDP to increase in the future

An increase in real GDP will be most likely to cause further increases in __________.

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A consumption only

B consumption and investment only

C consumption, investment, and net exports only

d consumption and investment, but a decrease in net exports

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If taxes are increased by $50 billion, the effect on the economy will be ___________.

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A an increase in inflation

B a decrease in total spending in the economy of $50 billion

C an increase in the international trade deficit

D an ultimate decrease in consumption spending of more than $50 billion

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An increase in net exports will cause GDP to ______________. Assume that the marginal propensity to consume increases from .9 to .95. An increase in net exports will now have a ______________ effect on GDP.

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A increase; larger

B increase; smaller

C decrease; larger

D decrease; smaller

E increase; one can not tell

An increase in the marginal propensity to consume will make the spending multiplier ______________. An increase in taxes as a portion of income will make the spending multiplier ______________.

A larger; larger

B smaller; smaller

C smaller; larger

D larger; smallerBottom of Form

C Inventories to decline and real GDP to decline in the future

d Inventories to increase and real GDP to decline in the future

To boost the economy, the government may propose a reduction in the income tax, which will _____________.

A increase the marginal propensity to save, which will raise funds available for investment

B increase the marginal propensity to consume, which will raise the consumption

C lower the marginal propensity to save, which will lower funds available for investment

D lower the marginal propensity to consume and thus raise consumption

Which of the following is not considered part of investment in the calculation of GDP?

A Machinery

b Stock ownership in a company

c Factories

d Inventories

What term refers to income after all taxes are paid?

A Disposable income

B Total income

C Net income

D Gross income

Answer 1

1.Lower investment spending because it raises the opportunity cost of funds.

2.Autonomous consumer spending; An autonomous consumer spending describes the components of an economy's aggregate expenditure that are not impacted by that same economy's real level of income. This type of spending is considered automatic and necessary, whether occurring at the government level or the individual level.

3.Inflation levels is the primary determinant of government spending.

4.If inventories are increasing,it may lead to decrease in GDP so Production is greater than consumption and investment, suggesting output will fall.

5.An increase in interest rates cause a decrease in consumption in the economy.

6.New housing construction is included in the calculation of U.S GDP.

7.If aggregate expenditure is greater than real GDP, we could expect inventories to decline and real GDP to increase in the future.

8. An increase in real GDP will be most likely to cause further increases in Consumption and investment, but a decrease in net exports.

9. If taxes are increased by $50 billion, the effect on the economy will be An ultimate decrease in consumption spending of more than $50 billion.

10.An increase in net exports will cause GDP to increase .Assume that the marginal propensity to consume increases from .9 to .95. An increase in net exports will now have a larger effect on GDP.

11.An increase in the marginal propensity to consume will make the spending multiplier larger. An increase in taxes as a portion of income will make the spending multiplier smaller.

12.To boost the economy, the government may propose a reduction in the income tax, which will Increase the marginal propensity to consume, which will raise the consumption.

13. Stock ownership in a company is not considered part of investment in the calculation of GDP

14.Net Income refers to income after all taxes are paid.