Question 1

Which of the following would be most likely to shift the consumption function downward?
A) a stock market crash
B) a price level decrease
C) increased corporate profits
D) a stock market boom

Accepted Answer

The answer of Which of the following would be most...

Question 2

Figure 8-2 
-In Figure 8-2,which of the following moves can be explained by an increase in government transfer payments?
A) A to B
B) A to C
C) A to D
D) A to E

Accepted Answer

The answer of Figure 8-2 
-In Figure 8-2,which of the...

Question 3

A once-and-for-all jump in the price level would initially cause a(n)
A) upward shift in the consumption function.
B) upward movement along the consumption function.
C) downward shift in the consumption function.
D) downward movement along the consumption function.

Accepted Answer

A once-and-for-all jump in the price level would lead to a decrease in real wealth and purchasing power of individuals, resulting in a downward shift in the consumption function. This is because with a lower real income, consumption expenditures are likely to decline, shifting the consumption function downward.

Question 4

Which of the following would lead you to predict an upward shift in the consumption function?
A) a decrease in the value of real wealth
B) a decrease in disposable income
C) an increase in the value of real wealth
D) an increase in the price level

Accepted Answer

An increase in the value of real wealth, such as an increase in property or asset values, would likely lead to an increase in consumer confidence and willingness to spend, thus shifting the consumption function upwards. Options A, B, and D would all have the opposite effect and lead to a downward shift in the consumption function.

Question 5

Which of the following will most likely have the greatest effect on an individual's consumption function?
A) winning a small amount in the lottery
B) a one-time tuition grant
C) a week of high overtime pay
D) an inheritance paying a modest annual dividend

Accepted Answer

An inheritance paying a modest annual dividend will have the greatest effect on an individual's consumption function because it provides a continuous flow of income, which can result in a sustained increase in consumption. In contrast, winning a small amount in the lottery, receiving a one-time tuition grant, or a week of high overtime pay may provide a temporary boost to consumption, but are not likely to have a lasting impact.

Question 6

A sudden decrease in consumers' wealth-resulting,for example,from a stock market crash-would initially cause a(n)
A) downward movement along the consumption function.
B) downward shift of the consumption function.
C) upward movement along the consumption function.
D) upward shift of the consumption function.

Accepted Answer

A sudden decrease in consumers' wealth would lead to a decrease in their disposable income and, as a result, shift the consumption function downward. This is because a decrease in wealth would cause consumers to reduce their spending in order to maintain their desired savings level.

Question 7

Which of the following will most likely cause a shift in the consumption function?
A) a change in consumer confidence
B) a change in national output
C) a change in real GDP
D) a change in disposable income

Accepted Answer

The answer of Which of the following will most likely...

Question 8

Which of the following will most likely cause movement along the consumption function?
A) a change in disposable income
B) a change in interest rates
C) a change in tastes
D) a change in consumers' expectations

Accepted Answer

The consumption function shows the relationship between consumption and disposable income. Therefore, a change in disposable income is most likely to cause movement along the consumption function.

Question 9

Which of the following is an example of wealth?
A) a yearly salary of $40,000
B) a mutual fund balance of $1,000
C) rental payments of $3,000 per month
D) stock dividends of $500 per quarter

Accepted Answer

The answer of Which of the following is an example...

Question 10

Price level changes have their greatest effect on consumers'
A) income.
B) wealth.
C) debt.
D) expectations.

Accepted Answer

Price level changes have their greatest effect on consumers' wealth. When the price level increases, the purchasing power of consumers' wealth decreases. This means that consumers can buy fewer goods and services for the same amount of money, leading to a decrease in their overall wealth. Conversely, when the price level decreases, the purchasing power of consumers' wealth increases, leading to an increase in their overall wealth.

Question 11

A decrease in the price level will most likely have what effect on the consumption function?
A) It will shift upward.
B) It will shift downward.
C) It will cause movement downward along the function.
D) It will cause movement upward along the function.

Accepted Answer

A decrease in the price level increases the real value of money, which typically leads to an increase in consumer spending. This is represented by an upward shift in the consumption function.

Question 12

Households can finance their consumer spending from current
A) income.
B) wealth.
C) debt.
D) income and current wealth.

Accepted Answer

Households can finance their consumer spending from their current income and also from their current wealth, such as savings, investments, or assets (e.g. home equity). Alternatively, households can also use debt, like credit cards or loans, to finance consumption, but this comes with the cost of interest payments and potentially higher future financial burdens.

Question 13

Figure 8-2 
-In Figure 8-2,which of the following moves can be explained by a tax cut?
A) A to B
B) A to C
C) A to D
D) A to E

Accepted Answer

The movement from point A to point E can be explained by a tax cut. Point E represents a higher level of output and employment than point A, indicating that the economy has experienced growth. A tax cut can stimulate economic growth by increasing the disposable income of consumers, which can lead to higher consumption spending and business investment.

Question 14

Consumption functions would shift downward if
A) disposable incomes fall.
B) disposable incomes rise.
C) price levels fall.
D) price levels rise.

Accepted Answer

The answer of Consumption functions would shift downward if
A) disposable...

Question 15

If the price level increases,we would expect consumers to
A) raise their consumption functions.
B) move downward along their consumption functions.
C) lower their consumption functions.
D) move upward along their consumption functions.

Accepted Answer

The answer of If the price level increases,we would expect...

Question 16

If the stock market falls by 25 percent next year and remains down,what is most likely to happen to the consumption function?
A) It will shift upward.
B) It will shift downward.
C) It will not shift,but people will move downward along the consumption function.
D) It will not shift,but people will move upward along the consumption function.

Accepted Answer

A decrease in the stock market would likely lead to a decrease in consumer wealth and confidence, resulting in lower consumption overall. Therefore, the consumption function would shift downward.

Question 17

Which of the following would cause an upward shift in the consumption function?
A) a stock market crash
B) an increase in the price level
C) a decrease in disposable income
D) a decrease in the price level

Accepted Answer

A decrease in the price level would cause the real value of disposable income to increase, leading to an increase in consumption.

Question 18

Pat Robertson,a TV evangelist and former Republican Party candidate for president,once said that "debt is an affront to God," so good Christians should not spend beyond their incomes.Indeed,Robertson wants Christians to save more.If more Americans,Christians as well as others,took his message seriously,how would we represent the result using a Keynesian macroeconomic model?
A) a downward movement along the consumption function
B) an upward movement along the consumption function
C) a downward shift of the consumption function
D) an upward shift of the consumption function

Accepted Answer

Robertson's message encourages individuals to save more, which would result in a decrease in consumption spending. This would cause a downward shift of the consumption function in a Keynesian macroeconomic model.

Question 19

After years of hard work in the field of macroeconomics,you win the Nobel Prize in economics (currently about $1.5 million).What is the most likely effect of this prize on your consumption function?
A) It will shift downward temporarily.
B) It will shift upward temporarily.
C) It will shift downward permanently.
D) It will shift upward permanently.
E) none of the above

Accepted Answer

The answer of After years of hard work in the...

Question 20

If Kobe,an NBA star athlete,earns $10 million per year but has no money in the bank,he has a
A) high income and high wealth.
B) low income and high wealth.
C) high income and low wealth.
D) low income and low wealth.

Accepted Answer

Income and wealth are two different things. Income refers to the amount of money one earns in a given period of time (such as a year), while wealth refers to the total amount of assets one owns (such as savings accounts, investments, property, etc.). In this case, Kobe has a high income of $10 million per year, but if he has no money in the bank, that means he has low wealth. Therefore, the best choice is C - high income and low wealth.

Quiz 8: Aggregate Demand and The Powerful Consumer

Which of the following would be most likely to shift the consumption function downward?

Figure 8-2 -In Figure 8-2,which of the following moves can be explained by an increase in government transfer payments?

A once-and-for-all jump in the price level would initially cause a(n)

Which of the following would lead you to predict an upward shift in the consumption function?

Which of the following will most likely have the greatest effect on an individual's consumption function?

A sudden decrease in consumers' wealth-resulting,for example,from a stock market crash-would initially cause a(n)

Which of the following will most likely cause a shift in the consumption function?

Which of the following will most likely cause movement along the consumption function?

Which of the following is an example of wealth?

Price level changes have their greatest effect on consumers'

A decrease in the price level will most likely have what effect on the consumption function?

Households can finance their consumer spending from current

Figure 8-2 -In Figure 8-2,which of the following moves can be explained by a tax cut?

Consumption functions would shift downward if

If the price level increases,we would expect consumers to

If the stock market falls by 25 percent next year and remains down,what is most likely to happen to the consumption function?

Which of the following would cause an upward shift in the consumption function?

After years of hard work in the field of macroeconomics,you win the Nobel Prize in economics (currently about $1.5 million) .What is the most likely effect of this prize on your consumption function?

If Kobe,an NBA star athlete,earns $10 million per year but has no money in the bank,he has a