Name: Class: Date: Module 16 Worksheet Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The marginal propensity to consume is: A. increasing if the marginal propensity to save is increasing. B. the proportion of total disposable income that the average family consumes. C. the change in consumer spending divided by the change in aggregate disposable income. D. the change in consumer spending less the change in aggregate disposable income. E. equal to 1. 2. The MPS plus the MPC must equal: A. zero. B. one. C. total income. D. saving. E. disposable income. 3. If the MPS =.1, then the value of the multiplier equals: A. 1. B. 5. C. 9. D. 10. E. 100. 4. If the multiplier equals 4, then the marginal propensity to save must be equal to: A. 1/4. B. 1/2. C. 3/4. D. 1/3 E. 1/5. 5. If the marginal propensity to save is 0.3, the size of the multiplier is: A. 3.3. B. 2.3. C. 1.3. D. 0.7. E. 10. 6. The marginal propensity to save is: A. savings divided by aggregate income. B. the fraction of an additional dollar of disposable income that is saved. C. 1 + MPC. D. 1/ MPC. E. equal to 1. 1
Name: 7. The multiplier is equal to: A. 1/[1 MPC]. B. MPS/MPC. C. 1/[MPC]. D. 1/[1+MPC]. E. 1/[1 MPS]. 8. If the MPC is 0.8, then the multiplier is: A. 4. B. 5. C. 8. D. 10. E. 2. 9. If disposable income increases by $5 billion and consumer spending increases by $4 billion, the marginal propensity to consume is equal to: A. 20. B. 0.8. C. 1.25. D. 9. E. 0.2. 10. Suppose that a financial crisis decreases investment spending by $100 billion and the marginal propensity to consume is 0.80. Assuming no taxes and no trade, by how much will real GDP change? A. $500 billion decrease. B. $200 billion decrease. C. $800 billion decrease. D. $400 billion increase. E. $100 billion decrease. 11. If your disposable personal income increases from $10,000 to $15,000 and your consumption increases from $9,000 to $13,000, your MPC is: A. 0.2. B. 0.4. C. 0.6. D. 0.8. E. 0.5. 12. The the, the the multiplier. A. smaller; level of wealth; greater B. greater; MPS; greater C. greater; MPC; smaller D. greater; MPC; greater E. smaller; MPC; greater 2
Name: 13. Suppose investment spending increases by $50 billion, and as a result real GDP increases by $200 billion. The multiplier is: A. 8. B. 10. C. 4. D. 1/4. E. 3. 14. If the multiplier is 4, and investment spending falls by $100 billion, the change in real GDP will be: A. -$40 billion. B. $400 billion. C. $25 billion. D. $25 billion. E. $400 billion. 15. If the size of MPS is decreasing, it will: A. make the multiplier smaller. B. make the multiplier larger. C. not affect the value of the multiplier. D. increase the interest rate. E. cause the MPC to also decrease. 16. The most important determinant of consumer spending is: A. the government budget deficit or surplus. B. the price of gasoline. C. the trade deficit. D. disposable income. E. the interest rate. 3
Name: Figure 16-3: Consumption Functions 17. Use the Consumption Functions Figure 16-3. Curve C' compared with curve C, would most likely result from a(n): A. decrease in wealth. B. higher price level. C. decrease in expected future disposable income. D. increase in wealth. E. increase in current disposable income. 18. Use the Consumption Functions Figure 16-3. Curve C", compared with curve C, would most likely result from: A. higher expected future disposable income. B. higher expected future GDP growth estimates. C. decrease in current disposable income. D. an increase in wealth. E. a drop in wealth. 19. Other things being equal, an increase in total wealth would and shift the consumption function _. A. increase autonomous consumption; up B. decrease the marginal propensity to consume; down C. decrease autonomous consumption; down D. increase the marginal propensity to consume; up E. increase autonomous consumption; down 20. Which one of the following will increase the aggregate consumption function? A. A decline in the value of the stock market. B. Increase in aggregate disposable income. C. Decrease in aggregate wealth. D. Decrease in expected future disposable income. E. Increase in aggregate wealth. 4
Module 16 Worksheet Answer Section MULTIPLE CHOICE 1. ANS: C PTS: 1 DIF: E REF: Module 16 MSC: Definitional 2. ANS: B PTS: 1 DIF: E REF: Module 16 MSC: Concept-Based 3. ANS: D PTS: 1 DIF: M REF: Module 16 4. ANS: A PTS: 1 DIF: M REF: Module 16 MSC: Analytical Thinking 5. ANS: A PTS: 1 DIF: M REF: Module 16 6. ANS: B PTS: 1 DIF: M REF: Module 16 MSC: Definitional 7. ANS: A PTS: 1 DIF: M REF: Module 16 MSC: Definitional 8. ANS: B PTS: 1 DIF: M REF: Module 16 9. ANS: B PTS: 1 DIF: M REF: Module 16 10. ANS: A PTS: 1 DIF: M REF: Module 16 11. ANS: D PTS: 1 DIF: M REF: Module 16 12. ANS: D PTS: 1 DIF: M REF: Module 16 MSC: Concept-Based 13. ANS: C PTS: 1 DIF: E REF: Module 16 MSC: Analytical Thinking 14. ANS: E PTS: 1 DIF: M REF: Module 16 15. ANS: B PTS: 1 DIF: M REF: Module 16 16. ANS: D PTS: 1 DIF: E REF: Module 16 MSC: Fact-Based 17. ANS: D PTS: 1 DIF: M REF: Module 16 18. ANS: E PTS: 1 DIF: D REF: Module 16 19. ANS: A PTS: 1 DIF: M REF: Module 16 20. ANS: E PTS: 1 DIF: M REF: Module 16 1
Module 16 Worksheet [Answer Strip] _ A 7. _ C 13. _ C 1. _ B 8. _ E 14. _ B 2. _ B 9. _ B 15. _ D 17. _ D 3. _ A 10. _ D 16. _ A 4. _ E 18. _ D 11. _ A 5. _ A 19. _ D 12. _ B 6. _ E 20.