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Final

ECON 1010 Study Guide - Final Guide: Disposable And Discretionary Income, Pearson Education, Chapter 27Exam


Department
Economics
Course Code
ECON 1010
Professor
Edward Haltrecht
Study Guide
Final

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Parkin/Bade, Economics: Canada in the Global Environment, 8e
Copyright © 2013 Pearson Canada Inc. 1063
Chapter 27 Expenditure Multipliers: The Keynesian Model
27.1 Fixed Prices and Expenditure Plans
1) Disposable income is
A) used for consumption only.
B) aggregate income minus taxes plus transfer payments.
C) aggregate income plus transfer payments.
D) aggregate income minus taxes.
E) aggregate income minus transfer payments.
Answer: B
Diff: 2 Type: MC
Topic: Fixed Prices and Expenditure Plans
2) Dissaving occurs when a household
A) spends less than it receives in disposable income.
B) spends more than it saves.
C) saves more than it spends.
D) consumes more than it receives in disposable income.
E) borrows.
Answer: D
Diff: 1 Type: MC
Topic: Fixed Prices and Expenditure Plans
3) Complete the following sentence. A household
A) consumes or pays taxes out of disposable income.
B) consumes, saves, or pays taxes out of disposable income.
C) consumes or saves out of disposable income.
D) only consumes out of disposable income.
E) None of the above.
Answer: C
Diff: 1 Type: MC
Topic: Fixed Prices and Expenditure Plans
4) The marginal propensity to consume is the
A) fraction of the first dollar of disposable income received that is saved.
B) fraction of the first dollar of disposable income received that is consumed.
C) fraction of the last dollar of disposable income received that is saved.
D) fraction of a change in disposable income that is spent on consumption.
E) total amount of consumption divided by the total amount of disposable income.
Answer: D
Diff: 1 Type: MC
Topic: Fixed Prices and Expenditure Plans

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

Parkin/Bade, Economics: Canada in the Global Environment, 8e
Copyright © 2013 Pearson Canada Inc. 1064
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 disposable income.
C) consumption expenditure divided by total disposable income.
D) the change in consumption expenditure divided by saving.
E) the change in consumption expenditure divided by the change in disposable income.
Answer: E
Diff: 1 Type: MC
Topic: Fixed Prices and Expenditure Plans
6) The marginal propensity to save is calculated as
A) saving divided by disposable income.
B) saving divided by the change in disposable income.
C) the change in saving divided by the change in consumption expenditure.
D) the change in saving divided by the change in disposable income.
E) the change in saving divided by disposable income.
Answer: D
Diff: 1 Type: MC
Topic: Fixed Prices and Expenditure Plans
7) The marginal propensity to consume
A) is negative if dissaving is present.
B) is greater than 1 if dissaving is present.
C) is between 1/2 and 1.
D) is greater than 1 but less than 2.
E) is between zero and 1.
Answer: E
Diff: 2 Type: MC
Topic: Fixed Prices and Expenditure Plans
8) The marginal propensity to save
A) equals 1 - MPC.
B) is between zero and 1/2.
C) is greater than 1.
D) is greater than 1 but less than 2.
E) is negative.
Answer: A
Diff: 2 Type: MC
Topic: Fixed Prices and Expenditure Plans

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

Parkin/Bade, Economics: Canada in the Global Environment, 8e
Copyright © 2013 Pearson Canada Inc. 1065
9) The sum of the marginal propensity to save and the marginal propensity to consume
A) always equals 1.
B) sometimes equals 1.
C) always equals 0.
D) never equals 1.
E) is greater than zero but less than 1.
Answer: A
Diff: 1 Type: MC
Topic: Fixed Prices and Expenditure Plans
10) If the marginal propensity to save is 0.2, then
A) the marginal propensity to consume is larger than 0.8.
B) the marginal propensity to consume is 0.8.
C) the marginal propensity to consume is also 0.2.
D) the slope of the consumption function is 0.2.
E) the slope of the saving function is 0.8.
Answer: B
Diff: 2 Type: MC
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 slope of the consumption function is 0.6.
C) the slope of the consumption function is 0.5.
D) the marginal propensity to consume over this range is negative.
E) the marginal propensity to save over this range is negative.
Answer: C
Diff: 2 Type: MC
Topic: Fixed Prices and Expenditure Plans
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.
B) equal to 0.75.
C) equal to 1.33.
D) negative.
E) equal to 0.67.
Answer: E
Diff: 1 Type: MC
Topic: Fixed Prices and Expenditure Plans
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