Your college is considering investing $6 million to add 10,000 seats to its football stadium. The athletic department forecasts it can sell all these extra seats at each game for a ticket price of $20 per seat, and the team plays six home games per year. If the school can borrow at an interest rate […]

The consumption function represents the relationship between consumer expenditures and a. interest rates.b. saving.c. the price level.d. disposable income.

John Maynard Keynes’s proposition that a dollar increase in disposable income will increase consumption, but by less than the increase in disposable income, implies a marginal propensity to consume that is a. greater than or equal to one.b. equal to one.c. less than one, but greater than zero.d. negative.

Which of the following changes produces an upward shift in the consumption function? a. An increase in consumer wealth.b. A decrease in consumer wealth.c. A decrease in autonomous consumption.d. Both answers b. and c. are correct.

An upward shift in the consumption function, other things being equal, could be caused by households a. becoming optimistic about the state of the economy.b. becoming pessimistic about the state of the economy.c. expecting future income and wealth to decline.d. None of the answers above are correct.

The investment demand curve represents the relationship between business spending for investment goods and a. GDP.b. interest rates.c. disposable income.d. saving.

The net exports line can be a. positive.b. negative.c. zero.d. any of the answers above.

There will be unplanned inventory investment accumulation when a. aggregate output (real GDP) equals aggregate expenditures.b. aggregate output (real GDP) exceeds aggregate expenditures.c. aggregate expenditures exceed aggregate output (real GDP).d. firms increase output.

John Maynard Keynes proposed that the multiplier effect can correct an economic depression. Based on this theory, an increase in equilibrium output would be created by an initial a. increase in investment.b. increase in government spending.c. decrease in government spending.d. Both answers a. and b. are correct.e. Both answers a. and c. are correct.

The spending multiplier is defined as