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# Questions for Cahpter 27

Questions for Chapter 27 of Macro Economics
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The consumption schedule is:
a direct relationship between consumption and disposable income.
If the slope of the consumption line is .8:
the MPC is .8.
Use the following diagram for this question.

Which of the following might have caused the shift from consumption schedule C1 to schedule C2?
An increase in household wealth
Suppose that for the entire economy, no investment projects will yield an expected real return of more than 12%. However, \$10 billion worth of projects will yield expected real returns of 9.1% to 12%, an additional \$10 billion will yield expected real returns of 6.1% to 9%, an additional \$10 billion will yield expected real returns of 3.1% to 6%, and an additional \$10 billion will yield expected real returns of 0% to 3%. If the real rate of interest is 6%, desired investment spending will be:
\$20 billion
If the MPC is .63, the multiplier is:
1 / .37
Along a particular saving schedule, each change in disposable income of \$15 billion generates an additional \$3 billion in saving. Therefore:
the MPS is .2.
The investment demand curve will shift to the left if:
Suppose the MPC is ¾. If investment spending falls by \$10 billion, the level of GDP will:
fall by \$40 billion
If consumption and disposable income are equal at a particular level of income:
saving must be zero at this point.
All else equal, if the interest rate rises:
planned investment spending will decrease
If 100 percent of any change in income is spent, the multiplier will be:
infinitely large
(Advanced analysis) Answer the question on the basis of the following data:

Which of the following equations correctly represents the above data?
C = 40 + .6Yd
The most important determinant of consumer spending is:
the level of income
A decline in the real interest rate will shift the investment demand curve to the right.
False
Other things equal, a decrease in the real interest rate will:
move the economy downward along its existing investment demand curve.
The consumption schedule shows:
the amounts households intend to consume at various possible levels of aggregate income.
In annual percentage terms, investment spending in the United States is:
more variable than real GDP.
The MPC for an economy is:
the slope of the consumption schedule or line
Which of the following would shift the investment demand curve from ID1 to ID3?
lower expected rates of return on investment
Suppose the economy's saving schedule shifts from S1 to S2 as shown in the above diagram. We can say that its:
MPS has increased
As disposable income increases, consumption:
and saving both increase
The MPC can be defined as that fraction of a:
change in income that is spent
The saving schedule shown in the above diagram would shift downward if, all else equal:
consumer wealth rose rapidly because of a significant increase in stock market prices.
Refer to the above diagram. At disposable income level D, consumption is:
equal to D minus CD
If DI is \$275 billion and the APC is 0.8, we can conclude that saving is \$55 billion.
True
Refer to the above diagram. At income level F the volume of saving is:
CD.
Answer the question on the basis of the following consumption schedules. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars.

Refer to the above data. The marginal propensity to save:
is highest in economy (1).
The actual multiplier effect in the U.S. economy is less than the multiplier effect in the text examples because:
in addition to saving, households use some of any increase in income to buy imported goods and to pay additional taxes.
Investment is highly stable; it increases over time at a very steady rate.
False
(Advanced analysis) Answer the question on the basis of the following consumption schedule: C = 20 + .9Y, where C is consumption and Y is disposable income.

Refer to the above data. The MPC is:
.90.