Macro Review Test

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1.Two economists, Smith and Jones, are discussing the currently high unemployment rate. Smith says that something ought to be done quickly because the economy may not be able to restore itself to full employment. Jones says that it is better to take a "hands-off" approach. Which of the following is most likely to be true? a.Smith and Jones are most likely both Keynesian economists with a few minor differences of opinion. b.Smith and Jones are most likely both classical economists with a few minor differences of opinion. c.Jones is likely to be a Keynesian economist and Smith is likely to be a classical economist. d.Smith is likely to be a Keynesian economist and Jones is likely to be a classical economist. e.none of the above.

Q16, Chapter 10,
2.Autonomous consumption is
a.the change in consumption that results as a person's (or nation's) income increases or decreases. b.that portion of total consumption that is dependent upon the level of income. c.the steady increase in the consumption of goods and services that automatically occurs as a person grows from a child to an adult. d.that portion of total consumption that is independent of the level of income. Q 20, Chp 10

3.If income rises from $1,000 to $1,400 and consumption rises from $800 to $1,175, the marginal propensity to consume is __________ percent. a.6.25
b.85
c.15
d.93.75
Q 25, Chp 10

4.If income rises from $1,000 to $1,800 and consumption rises from $1,100 to $1,700, the marginal propensity to save (MPS) is a.0.25.
b.0.75.
c.4.00.
d.2.00.
Q 29, Chp 10

5.Here is a consumption function: C = C0 + MPC(Yd). If MPC is 0.80, then we know that a.as Yd rises by $1, Co rises by $0.80.
b.as Yd rises by $1, C rises by $0.80.
c.Yd rises by $0.80.
d.as C0 rises by $0.80, Yd rises by $1.
Q 30 Chp 10
6.Here is a consumption function: C = C0 + MPC(Yd). If C0 = $200, then we know that a.if Yd is zero, C will be $200.
b.when Yd rises, C rises by $200.
c.when Yd falls, C falls by MPC times C0.
d.C will always equal C0.
Q31, Chp 10

7.When the MPC = 0.9, the multiplier is
a.0.20.
b.1.25.
c.2.50.
d.5.00.
e.10.00.
Q40, Chp 10

8.If an economy consumes 75 percent of any increase in income, then an increase in autonomous investment of $1 billion could result in an increase in Real GDP of as much as a.$1.0 billion..
b.$4.0 billion.
c.$5.0 billion.
d.$1.8 billion.
e.$6.0 billion.
Q46, Chp 10

9.If the purchase and sale of a currently illegal drug, such as marijuana, were decriminalized, we would expect a.an increase in demand and supply of this drug.
b.an increase in demand and a decrease in supply of this drug. c.a decrease in demand and an increase in supply of this drug. d.a decrease in demand and supply of this drug.
Q2, Chp5
10.If the purchase and sale of marijuana become legalized
a.the equilibrium price and quantity will both rise.
b.the equilibrium price will fall, but the change in equilibrium quantity depends upon whether the demand curve shifts more or the supply curve shifts more. c.the equilibrium quantity will rise, but the change in equilibrium price depends upon whether the demand curve shifts more or the supply curve shifts more. d.the equilibrium price and quantity will both fall.

Q3, Chp 5
11.If the government decided to legalize the purchase and sale of marijuana, the equilibrium quantity would _________ and the price would ________ if the supply of marijuana increased by _______ than the demand for marijuana increased. a.fall; fall; more

b.fall; rise; more
c.rise; fall; more
d.rise; fall; less
e.none of the above
Q4 Chp 5
12.Since most colleges and universities charge the same tuition to every student regardless of what time students choose to take their classes, a.the schools must develop some type of non-price rationing device. b.it follows that all classes will have a shortage of seats. c.it follows that all classes...
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