Econ 102 - Principles of Macroeconomics » Fall 2022 » Aggregate Demand (AD) Quiz

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Question #1
The relationship between consumption and disposable income is such that as
A.   disposable income rises, saving falls.
B.   disposable income rises, consumption falls.
C.   consumption rises, disposable income falls.
D.   disposable income rises, consumption rises.
Question #2
The U.S. experience with tax cuts and tax increases since 1964 suggests that
A.   tax changes have no effect on consumption spending.
B.   temporary tax changes are less effective than permanent changes.
C.   tax cuts always stimulate consumption spending.
D.   tax changes have a stable and predictable effect on consumption spending.
Question #3
Historical data representing consumption and disposable income reveals that
A.   there is no systematic relationship between the two.
B.   U.S. citizens increased saving during World War II.
C.   during the 1930s, U.S. saving was at a high level.
D.   consumption rises faster than disposable income during recessions.
Question #4
The marginal propensity to consume is
A.   the change in disposable income divided by the change in consumption.
B.   disposable income divided by consumption
C.   the change in consumption divided by the change in disposable income.
D.   consumption divided by disposable income.
Question #5
Assume that consumption in the United States is $9,000 billion in 2007. If the MPC is 0.8 and the disposable income increases by $1,000 billion in 2008, then the level of consumption in 2008 will be
A.   $10,000 billion.
B.   $9,000 billion.
C.   cannot be determined
D.   $9,800 billion.
Question #6
Which of the following is NOT a factor that influences investment spending?
A.   technical change
B.   transfer payment policy
C.   business confidence
D.   business expectations
Question #7
The largest component of aggregate demand is
A.   government spending.
B.   investment spending.
C.   total imports.
D.   consumer spending.
Question #8
Price level changes have their greatest effect on consumers'
A.   income.
B.   expectations.
C.   wealth.
D.   debt.
Question #9
Among the following, which would NOT be considered part of the investment component of GDP?
A.   manufacturers' equipment
B.   buying corporate stock
C.   new houses
D.   business structures

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