Households tend to spend a larger portion of

Households tend to spend a larger portion of

A) a small disposable income than a large disposable income
B) a large disposable income than a small disposable income
C) their disposable income on saving when the rate of return is high
D) their saving than their disposable income when the rate of return is low

Answer: A

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Basic Macroeconomic Relationships

• If in an economy a $150 billion increase in investment spending creates $150 billion of new income in the first round of the multiplier process and $105 billion in the second round, the multiplier and the marginal propensity to consume will be, respectively,
• If the marginal propensity to consume is 0.67 and initial spending increases by $25, real GDP will
• If the marginal propensity to consume is 0.6 and real GDP falls by $25, this is caused by a decrease in initial spending of
• If there was a change in investment spending of $10 and the marginal propensity to save was .25, then real GDP would increase by
• Which best explains the variability of investment?
• Which would increase investment demand?
• A decrease in investment demand would be a consequence of a decline in
• Which relationship is an inverse one?
• An increase in taxes shifts the consumption schedule
• Higher real interest rates are likely to
• Expectations of a recession are likely to lead households to
• An increase in wealth shifts the consumption schedule
• If the slope of a linear saving schedule decreases, then it can be concluded that the
• As the disposable income of the economy increases,
• If disposable income is $375 billion when the average propensity to consume is 0.8, it can be concluded that
• If consumption spending increases from $358 to $367 billion when disposable income increases from $412 to $427 billion, it can be concluded that the marginal propensity to consume is
• As disposable income decreases, ceteris paribus,
• Saving equals

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