Macro Chapter 5 Exam Questions And Answers

Macro Chapter 5 Exam Questions And Answers 1. Since 1955 Americans have been spending ____. a) a larger percentage of their incomes on services b) a smaller percentage of their incomes on services c) about the same percentage on services - ANS a) a larger percentage of their incomes on services 2. When the C line crosses the 45-degree line, saving is ____. a) positive b) negative c) zero d) impossible to calculate because there is not enough information to know - ANS c) zero 3.When disposable income is zero, ____. a) autonomous consumption is equal to induced consumption b) autonomous consumption is equal to total consumption c) induced consumption is equal to total consumption - ANS b) autonomous consumption is equal to total consumption 4. The minimum amount that people will spend even if disposable income is zero is called ___ consumption. a) autonomous b) induced c) total - ANS a) autonomous 5. According to the permanent income hypthesis, if a person received a windfall of $100,000, he would spend ___ that year. a) some of it b) most of it c) nearly all of it d) all of it - ANS a) some of it 6. As disposable income rises, ___ a) autonomous C rises b) autonomous C falls c) induced C rises d) induced C falls - ANS c) induced C rises 7. The larges component of GDP is ___. a) net exports b) investments c) consumption d) government purchases - ANS c) consumption 8. The largest component of C is ___. a) durable goods b) services c) nondurable goods - ANS b) services 9. The consumption function tells us that, as income rises, consumption ___. a) declines b) remains the same c) rises more slowly than income d) rises more quickly than income - ANS c) rises more slowly than income 10. When income levels are very low, C is ___. a) zero b) lower than income c) higher than income - ANS c) higher than income 11. When income is equal to consumption, saving is ____. a) negative b) zero c) positive d) impossible to calculate because there is insufficient information - ANS b) zero 12. Which of the following relations is N