**Tables translate into the following: Year, Consumption, Income, Savings, PMC, PMA**

1. When tax revenues exceed expenditures, the government has _____________, and when expenditures exceed tax revenues, the government has ________________.

1. a budget surplus; a budget deficit

2. a budget deficit; a budget surplus

3. a budget surplus; a budget debt

4. a budget debt; a budget surplus

2. The fixed-sum tax multiplier ____________________.

1. is between 0 and 1

2. equals the induced tax multiplier

3. is negative

4. is positive

3. An increase in the income tax rate is an example of ________________.

1. lump sum taxes

2. discretionary tax policy

3. increase in government deficit

4. increase in government debt

4. If in an economy the MPC = 0.75 and investment spending by companies (autonomous spending) increases by $ 500 million, what effect will this spending have on real GDP? You must first calculate the multiplier for the economy and then determine the effect that spending will have.

(MPC = marginal propensity to consume)

(GDP change = additional spending multiplier)

multiplier M = 1 / (1 - PMC)

__________________________.

5. If the slope of the saving function is 0.27, then the marginal propensity to ______________.

1. consume is 0.27

2. save is 0.73

3. import is less than 0.27.

4. consume is 0.73

6. The consumption function shifts if each of the following events occurs except _____________________.

1. an increase in autonomous consumption

2. a decrease in the real interest rate

3. an increase in expected future income

4. an increase in disposable income

7. A cyclical deficit is one that exists ___________________.

1. during an expansion of an economic cycle

2. even when the economy is in full employment

3. only during a recession

4. only when real GDP is less than potential GDP

8. Exercises on the consumption and savings function