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Basic Macroeconomic relationships

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Presentation on theme: "Basic Macroeconomic relationships"— Presentation transcript:

1 Basic Macroeconomic relationships
Chapter 10 Basic Macroeconomic relationships

2 Taylor Economics – Chapter 10
1. The size of the MPC is assumed to be: less than zero. greater than one. greater than zero, but less than one. two or more. Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

3 Taylor Economics – Chapter 10
1. The size of the MPC is assumed to be: less than zero. greater than one. greater than zero, but less than one. two or more. Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

4 Taylor Economics – Chapter 9
2. Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return on this tool is: 80 percent. 8 percent. 2 percent. 20 percent. Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

5 Taylor Economics – Chapter 9
2. Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000. The expected rate of return on this tool is: 80 percent. 8 percent. 2 percent. 20 percent. Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

6 Taylor Economics – Chapter 10
3. If business taxes are reduced and the real interest rate increases: consumption and saving will necessarily increase. the level of investment spending might either increase or decrease. the level of investment spending will necessarily increase. the level of investment spending will necessarily decrease. Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

7 Taylor Economics – Chapter 10
3. If business taxes are reduced and the real interest rate increases: consumption and saving will necessarily increase. the level of investment spending might either increase or decrease. the level of investment spending will necessarily increase. the level of investment spending will necessarily decrease. Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

8 Taylor Economics – Chapter 10
4. The multiplier effect means that: consumption is typically several times as large as saving. a change in consumption can cause a larger increase in investment. an increase in investment can cause GDP to change by a larger amount. a decline in the MPC can cause GDP to rise by several times that amount. Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

9 Taylor Economics – Chapter 10
4. The multiplier effect means that: consumption is typically several times as large as saving. a change in consumption can cause a larger increase in investment. an increase in investment can cause GDP to change by a larger amount. a decline in the MPC can cause GDP to rise by several times that amount. Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

10 Taylor Economics – Chapter 10
5. As disposable income decreases, consumption: And saving both increase And saving both decrease Increases and saving decreases Decreases and saving increases Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

11 Taylor Economics – Chapter 10
5. As disposable income decreases, consumption: And saving both increase And saving both decrease Increases and saving decreases Decreases and saving increases Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

12 Taylor Economics – Chapter 10
6. If the consumption schedule shifts downward, and the shift was not caused by a tax change, then the saving schedule: May shift either upward or downward Will shift downward Will shift upward Will not shift Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

13 Taylor Economics – Chapter 10
6. If the consumption schedule shifts downward, and the shift was not caused by a tax change, then the saving schedule: May shift either upward or downward Will shift downward Will shift upward Will not shift Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

14 Taylor Economics – Chapter 10
7.  Which would shift the consumption schedule upward? A decrease in wealth An increase in wealth Consumer expectations of falling prices Consumer expectations of product surpluses Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

15 Taylor Economics – Chapter 10
7.  Which would shift the consumption schedule upward? A decrease in wealth An increase in wealth Consumer expectations of falling prices Consumer expectations of product surpluses Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

16 Taylor Economics – Chapter 10
8. An inverse relationship between the rate of interest and the level of: Income is suggested by the consumption function Prices is suggested by the aggregate supply curve Employment is suggested by the aggregate demand curve Investment spending is suggested by the investment-demand curve Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

17 Taylor Economics – Chapter 10
8. An inverse relationship between the rate of interest and the level of: Income is suggested by the consumption function Prices is suggested by the aggregate supply curve Employment is suggested by the aggregate demand curve Investment spending is suggested by the investment-demand curve Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

18 Taylor Economics – Chapter 10
9. Which would decrease investment demand? A decrease in business taxes An increase in the cost of acquiring capital goods An increase in the rate of technological change A decrease in the stock of capital goods on hand Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

19 Taylor Economics – Chapter 10
9. Which would decrease investment demand? A decrease in business taxes An increase in the cost of acquiring capital goods An increase in the rate of technological change A decrease in the stock of capital goods on hand Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

20 Taylor Economics – Chapter 10
10. Generally speaking, the greater the MPS, the: Smaller would be the increase in income which results from an increase in consumption spending Larger would be the increase in income which results from an increase in consumption spending Larger would be the increase in income which results from a decrease in consumption spending Smaller would be the increase in income which results from a decrease in consumption spending Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.

21 Taylor Economics – Chapter 10
10. Generally speaking, the greater the MPS, the: Smaller would be the increase in income which results from an increase in consumption spending Larger would be the increase in income which results from an increase in consumption spending Larger would be the increase in income which results from a decrease in consumption spending Smaller would be the increase in income which results from a decrease in consumption spending Source: Ch 1, Micro Test Bank, #2 Copyright © Houghton Mifflin Company. All rights reserved.


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