Specific Request: Give explanation for each answer so that it would be useful for my study session.

1. When aggregate supply exceeds aggregate demand, the economy is said to have...

A.excess capacity

B.constant prices

C.a horizontal supply curve

D.all of the above

E.the first two options only

2. When price cannot be affected by changes in spending, the supply curve is said to be

A.vertical

B.upward-sloping

C.horizontal

D.downward-sloping

E.a 45-degree line

3. In economics where demand exceeds supply, the following factor/s become crucial

A.the efficiency of the factors of production

B.the availability of the factors of production

C.the costs of the factors of production

D.all tax rates

E.all of the above

4. Productivity determines output when

A.there is an excess of skilled labor

B.the factors of production are insufficient

C.all factors of production, including technological know-how, is sufficient

D.there is unemployment

5. Consumption is assumed to be linear function of income, such that C = b + cY. "b" here means

A.the level of consumption when the population is not earning

B.the marginal propensity to consume

C.the average propensity to consume

D.the level of spending when income is at its peak

E.the portion that consumers save

6. Savings consist of

A.the total of all assets held by families

B.income received within the period and not spent on consumption

C. the total of all assets held by families minus the total of their liabilities

D. income received within the period but used only to buy a security or deposited in a bank

E. disposable income minus consumption

7. Consumption is said to break-even when

A.savings equal consumption

B.the consumption function intersects with the 45-degree line

C.the marginal propensity to consume equals the marginal propensity to save

D.autonomous consumption is zero

E.consumption is less than income

8. The marginal propensity to consume is the

A.ratio of consumption to income

B.ratio of income to consumption

C.change in consumption resulting from a unit change in income

D.change in income resulting from a unit change in consumption

E.change in income

9. A family receives P40,000 income monthly. It spends P36,000 on consumption. if this family's income were to rise from P40,000 to P48,000 its consumption expenditure would rise to P40,000. In this case, the marginal propensity to consume is

A.1/4

B.1/2

C.3/4

D.1

E.2

10. A family whose consumption is fixed regardless of income has a marginal propensity to save of

A.zero

B.more than 0 but less than 1

C.more than 0 but less than MPC

D.equal magnitude to the MPC

E.an undetermined magnitude

11. When the word "investment" is used in connection with national income analysis, it means specifically

A. the money value of the economy's total stock of plant and equipment, housing and inventories on unconsumed goods

B. the expenditure of money to buy bonds, debentures, stocks or any other financial instruments used to finance productive activity

C. the expenditure of money to have new plant and equipment or new housing built, or to increase inventories of newly produced goods

D. the total of the economy's wealth in bonds, debentures, stocks and other financial instruments, but excluding money supply

E. the total of the economy's wealth in bonds, debentures, stocks, and other such financial instruments, plus the total stock of plant and equipment, housing and inventories of unconsumed goods

12. Additional investment causes

A. an upward shift in the consumption function

B. a downward shift in the consumption function

C. equilibrium at a lower level

D. equilibrium at a higher level

E. an inflationary gap

13. If Y = C + I and I = 100 and C is 100 + 3/4 of Y, what would Y be?

A. 1000

B. 900

C. 800

D. 700

E. none of the above

14. At equilibrium, the following condition holds

A. there is no unintended investment

B. saving equals government spending

C. actual spending equals actual income

D. all of the above

E. none of the above

15. Beyond equilibrium, the economy will tend to

A. experience a deflationary gap

B. earn more than it spends

C. dissave

D. disinvest

E. experience more leakages than injections

16. Equilibrium occurs when

A.aggregate spending equals aggregate income

B.aggregate demand equals aggregate output

C.saving equals investment

D.all of the above

E.all of the first three options

17. If the economy is on equilibrium and saving equals investment, then government expenditures must be

A. zero

B. equal to tax collections

C. less than tax collections

D. larger than tax revenues

E. equal to saving

18. A higher multiplier would be associated with

A. a lower marginal propensity to consume

B. a higher marginal propensity to consume

C. higher investments

D. higher government spending

E. 2nd, 3rd, and 4th options only

19. Given: Investment = 45 Initial consumption at zero disposable Income = 75 Marginal Propensity to Consume = .75 Government Spending = 30 Net Exports = 25 The size of the multiplier for this economy is

A. 3

B. 4

C. 5

D. 6

E. none of the above

20. Given: Investment = 45 Initial consumption at zero disposable Income = 75 Marginal Propensity to Consume = .75 Government Spending = 30 Net Exports = 25 Using the model Y = C + I, the equilibrium level of income for this economy is

A.460

B.470

C.480

D.500

none of the above