# ECN 204 Lecture Notes - Lecture 4: Disposable And Discretionary Income, Grain Elevator, European Route E40Exam

by OC2161431

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**preview**shows pages 1-3. to view the full**33 pages of the document.** University of Lethbridge

â

Department of Economics

ECON 1012

â

Introduction to Macroeconomics

Instructor: Michael G. Lanyi

CH 27 â Expenditure Multipliers

1)

Disposable income is

A)

aggregate income minus transfer payments.

B)

used for consumption only.

C)

aggregate income plus transfer payments.

D)

aggregate income minus taxes.

E)

aggregate income minus taxes plus transfer payments.

Topic:

Fixed Prices and Expenditure Plans

2)

Dissaving occurs when a household

A)

saves more than it spends.

B)

spends more than it saves.

C)

borrows.

D)

spends less than it receives in disposable income.

E)

consumes more than it receives in disposable income.

Topic:

Fixed Prices and Expenditure Plans

3)

Complete the following sentence. A household

A)

consumes or saves out of disposable income.

B)

consumes or pays taxes out of disposable income.

C)

only

consumes out of disposable income.

D)

consumes, saves, or pays taxes out of disposable income.

E)

None of the above.

Topic:

Fixed Prices and Expenditure Plans

4)

The marginal propensity to consume is the

A)

fraction of the last dollar of disposable income received that is saved.

B)

fraction of the first dollar of disposable income received that is saved.

C)

total amount of consumption divided by the total amount of disposable income.

D)

fraction of the first dollar of disposable income received that is consumed.

E)

fraction of a change in disposable income that is spent on consumption.

Topic:

Fixed Prices and Expenditure Plans

5)

The marginal propensity to consume is calculated as

A)

consumption expenditure divided by the change in disposable income.

B)

the change in consumption expenditure divided by the change in disposable income.

C)

consumption expenditure divided by total disposable income.

D)

the change in consumption expenditure divided by disposable income.

E)

the change in consumption expenditure divided by saving.

Topic:

Fixed Prices and Expenditure Plans

1

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6)

The marginal propensity to save is calculated as

A)

saving divided by the change in disposable income.

B)

the change in saving divided by the change in consumption expenditure.

C)

saving divided by disposable income.

D)

the change in saving divided by disposable income.

E)

the change in saving divided by the change in disposable income.

Topic:

Fixed Prices and Expenditure Plans

7)

The marginal propensity to consume

A)

is between zero and 1.

B)

is greater than 1 if dissaving is present.

C)

is between 1/2 and 1.

D)

is negative if dissaving is present.

E)

is greater than 1 but less than 2.

Topic:

Fixed Prices and Expenditure Plans

8)

The marginal propensity to save

A)

is greater than 1 but less than 2.

B)

equals 1

î

MPC

.

C)

is greater than 1.

D)

is between zero and 1/2.

E)

is negative.

Topic:

Fixed Prices and Expenditure Plans

9)

The sum of th

e marginal propensity to save and the marginal propensity to consume

A)

is greater than zero but less than 1.

B)

always equals 1.

C)

always equals 0.

D)

sometimes

equals 1.

E)

never equals 1.

Topic:

Fixed Prices and Expenditure Plans

10)

If the marginal propensity to save is 0.2, then

A)

the marginal propensity to consume is 0.8.

B)

the marginal propensity to consume is also 0.2.

C)

the slope of the consumption function is 0.2.

D)

the slope of the saving function is 0.8.

E)

the marginal propensity to consume is larger than 0.8.

Topic:

Fixed Prices and Expenditure Plans

11)

If a household's disposable income increases from $12,000 to $22,000 and at the same time its consumption

expenditure increases from $4,000 to $9,000, then

A)

the household is dissaving.

B)

the marginal propensity to save over this range is negative.

C)

the slope of the consumption function is 0.6.

D)

the marginal propensity to consume over this range is negative.

E)

the slope of the consumption function is 0.5.

Topic:

Fixed Prices and Expenditure Plans

2

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12)

If consumption expenditure for a household increases from $300 to $500 when disposable income increases from $200

to $500, the marginal propensity to consume is

A)

equal to 1.33.

B)

negative.

C)

equal to 0.67.

D)

equal to 0.75.

E)

equal to 1.

Topic:

Fixed Prices and Expenditure Plans

13)

If the marginal propensity to consume is 0.85, what change in consumption expenditure would you expect if

disposable income increases by $200 million?

A)

$170 million

B)

$18 million

C)

$1,800 million

D)

$20 million

E)

$180 million

Topic:

Fixed Prices and Expenditure Plans

14)

If consumption is $8,000 when disposable income is $10,000, the marginal propensity to consume

A)

is 1.25.

B)

is 0.80.

C)

is 0.75.

D)

is 0.50.

E)

cannot be determined from the information given.

Topic:

Fixed Prices and Expenditure Plans

3

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