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

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