Econ 102 - Principles of Macroeconomics » Spring 2023 » 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.   consumption rises, disposable income falls.
C.   disposable income rises, saving falls.
D.   disposable income rises, consumption falls.
Question #2
Historical data representing consumption and disposable income reveals that
A.   U.S. citizens increased saving during World War II.
B.   there is no systematic relationship between the two.
C.   consumption rises faster than disposable income during recessions.
D.   during the 1930s, U.S. saving was at a high level.
Question #3
Aggregate demand is defined as the total spending
A.   of consumers, businesses, and government agencies on final output.
B.   by all consumers, business firms, government agencies, and foreigners in the United States.
C.   consumers, businesses, government agencies, and foreigners wish to make in one year.
D.   of all consumers, business firms, government agencies, and foreigners on final goods and services produced in the United States.
Question #4
The U.S. experience with tax cuts and tax increases since 1964 suggests that
A.   tax cuts always stimulate consumption spending.
B.   temporary tax changes are less effective than permanent changes.
C.   tax changes have a stable and predictable effect on consumption spending.
D.   tax changes have no effect on consumption spending.
Question #5
Most older persons regularly spend more than their current disposable income. How is this possible?
A.   They withdraw funds from accumulated wealth.
B.   They borrow and increase their debt levels.
C.   They receive government transfer payments.
D.   They work to supplement their retirement income.
Question #6
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.   $9,800 billion.
C.   cannot be determined
D.   $9,000 billion.
Question #7
Which of the following is NOT a factor that influences investment spending?
A.   transfer payment policy
B.   business expectations
C.   technical change
D.   business confidence
Question #8
The sum of all factor payments in the economy yields
A.   net domestic product.
B.   gross domestic product.
C.   disposable income.
D.   national 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.   business structures
D.   manufacturers' equipment
Question #10
The federal government's principle tool in altering consumer spending is changing
A.   corporate income taxes.
B.   unemployment insurance benefits.
C.   personal income tax rates.
D.   federal sales taxes.

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