1. | If consumption increases by $8 when after-tax disposable income increases by $10, the marginal propensity to consume equals: A. | 0.2 | B. | 0.8 | C. | 2.0 | D. | 8.0 | | 2. | In the basic Keynesian model all of the following are true EXCEPT: A. | planned consumption always equals actual consumption. | B. | planned investment always equals actual investment. | C. | planned government spending always equals actual government spending. | D. | planned net exports always equal actual net exports. | | 3. | Unplanned inventory investment equals zero when A. | planned investment is greater than actual investment. | B. | planned investment is less than actual investment. | C. | planned investment equals actual investment. | D. | expected sales are greater than actual sales. | | 4. | Changes in government purchases affect planned spending: A. | only when there is an expansionary gap. | B. | autonomously. | C. | directly. | D. | by changing disposable income and, consequently, consumption. | | | | 5. | Refer to the figure above. Based on the figure, if autonomous spending increases from 400 to 600, then the new short-run equilibrium output will equal: A. | 1,200. | B. | 400. | C. | 600. | D. | 800. | | 6. | When housing prices decrease, household wealth _____ and consumption _____. A. | increases; increases | B. | increases; decreases | C. | decreases; decreases | D. | decreases; increases | | 7. | The four components of planned aggregate expenditure are: A. | spending on domestic goods, domestic services, foreign goods, and foreign services. | B. | spending on durable goods, inventory investment, government debt, and net exports. | C. |
