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

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