Macro Mcgraw Hill Final Exam Questions and Answers Verified
Solutions Latest Update
Question: D)movement along an existing investment schedule.
Answer:
A)shift of the consumption schedule
(Y axis is consumption, x axis is disposable income, C1 shifts up to C2)
Suppose an economy's consumption schedule shifts from C1 to C2, as shown in the diagram. We can
say that its
A)MPC has increased, but its APC at each income level is unchanged.
B)APC at each income level is increased, but its MPC is unchanged.
C)MPC and APC at each income level have both increased.
Question: APC at each income level have both decreased.
Answer:
C)MPC and APC at each income level have both increased.
(Consumption y axis, income is x-axis, C1 is below C2)
Refer to the given graph. A shift of the consumption schedule from C2 to C1 might be caused by a(n)
A)increase in real GDP
B)reverse wealth effect, caused by a decrease in stock market prices.
C)decrease in income tax rates
Question: D)decrease in saving.
Answer:
B)reverse wealth effect, caused by a decrease in stock market prices.
If the consumption schedule shifts upward and the shift was not caused by a tax change, the saving
schedule
A)will not shift.
B)may shift either upward or
Downward.
C)will shift downward.
Question: D)will also shift upward.
Answer:
C)will shift downward.
Question: Which of the following will not tend to shift the consumption schedule upward?
Answer:
A)a currently small stock of durable goods in the possession of consumers B)the expectation of a future
decline in the consumer price index C)a currently low level of household debt
,Question: D)the expectation of future shortages of essential consumer goods
Answer:
B)the expectation of a future decline in the consumer price index
An upward shift of the saving schedule suggests
A)nothing with respect to changes in the APC and APS; only that the MPS has changed.
B)that the APC and APS have both decreased at each GDP level.
C)that the APC and APS have both increased at each GDP level.
Question: GDP level.
Answer:
D)that the APC has decreased and the APS has increased at each GDP level.
Question: When consumption and saving are graphed relative to real GDP, an increase in personal
taxes will shift?
Answer:
A)both the consumption and saving schedules downward. B)both the consumption and saving
schedules upward. C)the consumption schedule upward and the saving schedule downward.
Question: D)the consumption schedule downward and the saving schedule upward.
Answer:
A)both the consumption and saving schedules downward.
(C1 is below C2, consumption is y-axis, income is y-axis, a is below b)
Refer to the given graph. A movement from a to b along C1 might be caused by a(n)
A)recession.
B)wealth effect of an increase in stock market prices.
C)increase in income tax rates.
Question: GDP.
Answer:
D)increase in real GDP.
(Real interest rate is on y-axis, investment is on x-axis, ID1 is lowest and ID3 is highest)
In the accompanying graph, which of the following would shift the investment demand curve from ID2
to ID1?
A)a falling real interest rate
B)a rising real interest rate
C)increasing operating costs for capital goods
,Question: D)decreasing operating costs for capital goods
Answer:
C)increasing operating costs for capital goods
(Saving is y-axis, disposable income x-axis, s2 is steeper and above S1, the lines cross)
Suppose the economy's saving schedule shifts from S1 to S2, as shown in the given diagram. We can
say that its
A)MPC has increased.
B)MPS has increased.
C)APS has increased at all levels of disposable income.
Question: APS has decreased at all levels of disposable income.
Answer:
B)MPS has increased.
(C1 is below C2, consumption is y axis, income is x-axis)
Refer to the given graph. A shift of the consumption schedule from C1 to C2 might be caused by a(n)
A)recession.
B)wealth effect of an increase in stock market prices.
C)increase in income tax rates.
Question: D)increase in saving.
Answer:
B)wealth effect of an increase in stock market prices.
The so-called Paradox of Thrift that became quite obvious in the Great Recession of 2007-2009 does
not refer to which of the following?
A)Saving may be virtuous for the individual, but it could be bad for the economy as a whole.
B)Consumers becoming thriftier may help long-term growth but, ironically, reduces current output.
C)In trying to spend less now, consumers will end up spending more later on.
Question: As individuals try to save more, the whole group may end up saving less as total income
declines.
Answer:
C)In trying to spend less now, consumers will end up spending more later on.
(ID1 is lowest with ID3 being highest, real interest rates is y-axis, and investment is x-axis)
In the accompanying graph, which of the following would shift the investment demand curve from ID2
to ID3?
A)greater inventories of capital goods
B)higher business taxes on capital goods
C)a more rapid rate of technological progress
, Question: D)lower expected rates of return on investment in capital goods
Answer:
C)a more rapid rate of technological progress
In the late 1990s, the U. S. stock market boomed, causing U. S. consumption to rise. Economists refer
to this outcome as the
A)Keynes effect.
B)interest-rate effect.
C)wealth effect.
Question: D)multiplier effect.
Answer:
C)wealth effect.
Assume the economy's consumption and saving schedules simultaneously shift downward. This must
be the result of
A) an increase in disposable income.
B)an increase in household wealth.
C)an increase in personal taxes.
Question: D)the expectation of a recession.
Answer:
C)an increase in personal taxes.
If for some reason households become increasingly thrifty, we could show this by
A)a downshift of the saving schedule.
B)an upward shift of the consumption schedule.
C)an upward shift of the saving schedule.
Question: D)a movement down along a stable consumption function.
Answer:
C)an upward shift of the saving schedule.
Question: Which of the following will not cause the consumption schedule to shift?
Answer:
A)a sharp increase in the amount of wealth held by households B)a change in consumer incomes C)the
expectation of a recession
Solutions Latest Update
Question: D)movement along an existing investment schedule.
Answer:
A)shift of the consumption schedule
(Y axis is consumption, x axis is disposable income, C1 shifts up to C2)
Suppose an economy's consumption schedule shifts from C1 to C2, as shown in the diagram. We can
say that its
A)MPC has increased, but its APC at each income level is unchanged.
B)APC at each income level is increased, but its MPC is unchanged.
C)MPC and APC at each income level have both increased.
Question: APC at each income level have both decreased.
Answer:
C)MPC and APC at each income level have both increased.
(Consumption y axis, income is x-axis, C1 is below C2)
Refer to the given graph. A shift of the consumption schedule from C2 to C1 might be caused by a(n)
A)increase in real GDP
B)reverse wealth effect, caused by a decrease in stock market prices.
C)decrease in income tax rates
Question: D)decrease in saving.
Answer:
B)reverse wealth effect, caused by a decrease in stock market prices.
If the consumption schedule shifts upward and the shift was not caused by a tax change, the saving
schedule
A)will not shift.
B)may shift either upward or
Downward.
C)will shift downward.
Question: D)will also shift upward.
Answer:
C)will shift downward.
Question: Which of the following will not tend to shift the consumption schedule upward?
Answer:
A)a currently small stock of durable goods in the possession of consumers B)the expectation of a future
decline in the consumer price index C)a currently low level of household debt
,Question: D)the expectation of future shortages of essential consumer goods
Answer:
B)the expectation of a future decline in the consumer price index
An upward shift of the saving schedule suggests
A)nothing with respect to changes in the APC and APS; only that the MPS has changed.
B)that the APC and APS have both decreased at each GDP level.
C)that the APC and APS have both increased at each GDP level.
Question: GDP level.
Answer:
D)that the APC has decreased and the APS has increased at each GDP level.
Question: When consumption and saving are graphed relative to real GDP, an increase in personal
taxes will shift?
Answer:
A)both the consumption and saving schedules downward. B)both the consumption and saving
schedules upward. C)the consumption schedule upward and the saving schedule downward.
Question: D)the consumption schedule downward and the saving schedule upward.
Answer:
A)both the consumption and saving schedules downward.
(C1 is below C2, consumption is y-axis, income is y-axis, a is below b)
Refer to the given graph. A movement from a to b along C1 might be caused by a(n)
A)recession.
B)wealth effect of an increase in stock market prices.
C)increase in income tax rates.
Question: GDP.
Answer:
D)increase in real GDP.
(Real interest rate is on y-axis, investment is on x-axis, ID1 is lowest and ID3 is highest)
In the accompanying graph, which of the following would shift the investment demand curve from ID2
to ID1?
A)a falling real interest rate
B)a rising real interest rate
C)increasing operating costs for capital goods
,Question: D)decreasing operating costs for capital goods
Answer:
C)increasing operating costs for capital goods
(Saving is y-axis, disposable income x-axis, s2 is steeper and above S1, the lines cross)
Suppose the economy's saving schedule shifts from S1 to S2, as shown in the given diagram. We can
say that its
A)MPC has increased.
B)MPS has increased.
C)APS has increased at all levels of disposable income.
Question: APS has decreased at all levels of disposable income.
Answer:
B)MPS has increased.
(C1 is below C2, consumption is y axis, income is x-axis)
Refer to the given graph. A shift of the consumption schedule from C1 to C2 might be caused by a(n)
A)recession.
B)wealth effect of an increase in stock market prices.
C)increase in income tax rates.
Question: D)increase in saving.
Answer:
B)wealth effect of an increase in stock market prices.
The so-called Paradox of Thrift that became quite obvious in the Great Recession of 2007-2009 does
not refer to which of the following?
A)Saving may be virtuous for the individual, but it could be bad for the economy as a whole.
B)Consumers becoming thriftier may help long-term growth but, ironically, reduces current output.
C)In trying to spend less now, consumers will end up spending more later on.
Question: As individuals try to save more, the whole group may end up saving less as total income
declines.
Answer:
C)In trying to spend less now, consumers will end up spending more later on.
(ID1 is lowest with ID3 being highest, real interest rates is y-axis, and investment is x-axis)
In the accompanying graph, which of the following would shift the investment demand curve from ID2
to ID3?
A)greater inventories of capital goods
B)higher business taxes on capital goods
C)a more rapid rate of technological progress
, Question: D)lower expected rates of return on investment in capital goods
Answer:
C)a more rapid rate of technological progress
In the late 1990s, the U. S. stock market boomed, causing U. S. consumption to rise. Economists refer
to this outcome as the
A)Keynes effect.
B)interest-rate effect.
C)wealth effect.
Question: D)multiplier effect.
Answer:
C)wealth effect.
Assume the economy's consumption and saving schedules simultaneously shift downward. This must
be the result of
A) an increase in disposable income.
B)an increase in household wealth.
C)an increase in personal taxes.
Question: D)the expectation of a recession.
Answer:
C)an increase in personal taxes.
If for some reason households become increasingly thrifty, we could show this by
A)a downshift of the saving schedule.
B)an upward shift of the consumption schedule.
C)an upward shift of the saving schedule.
Question: D)a movement down along a stable consumption function.
Answer:
C)an upward shift of the saving schedule.
Question: Which of the following will not cause the consumption schedule to shift?
Answer:
A)a sharp increase in the amount of wealth held by households B)a change in consumer incomes C)the
expectation of a recession
