TRUE OR FALSE
If the statement is true, skip it. If the statement is false, write a sentence that explains why the statement is false.
1. The four major components of aggregate expenditure in Viet Nam are consumption, saving, investment and net exports.
2. The most important factor in determining the level of consumption spending in Viet Nam is the rate of interest.
3. When the consumption function is below the 45 degree line, saving is positive.
4. In most countries, the average propensity to consume tends to rise as incomes rise.
5. If the marginal propensity to consume of Viet Nam is .75, the marginal propensity to save of Viet Nam is .25.
6. Endogenous consumption does not depend on the level of disposable income.
7. The marginal propensity to consume out of real GDP is usually smaller than the marginal propensity to consume out of disposable income.
8. The three most important factors in determining the level of planned investment spending in Viet Nam are: the current level of disposable income, profit expectations and the existing capital stock.
9. The real interest rate is approximately equal to the nominal rate of interest plus the inflation rate.
10. All other things being held constant, increases in the real rate of interest tend to result in decreases in the level of planned investment.
11. In most cases, both government expenditures and net exports tend to increase when the level of GDP increases.
12. If the level of exports is fixed, the slope of Viet Nam's Net Export function is equal to Viet Nam's Marginal Propensity to Import.
13. The four most important influences on the size of Viet Nam's imports are (1) foreign GDP, (2) international specialization, (3) the relative prices of domestic and foreign goods, and (4) exchange rates.
14. The aggregate planned expenditure function normally has a positive intercept and a positive slope.
15. A decrease in production will generally reduce aggregate planned expenditures by an amount greater than the original decrease in production.
16. If the Aggregate Planned Expenditure curve is above the 45 degree line, firms will find that they are accumulating unplanned inventories.
17. An increase in the price level will shift downwards the aggregate planned expenditure curve and thus shift downward the aggregate demand curve.
18. Viet Nam's Aggregate Demand curve is constructed in exactly the same way the demand curve for an individual product is constructed.
19. Viet Nam's marginal propensity to consume remains relatively constant over time.
20. An increase in the Vietnamese price level will tend to raise the level of autonomous consumption, thus shifting the Vietnamese consumption function upward.
21. An increase in taxes paid by Vietnamese consumers will tend to decrease the amount they consume and increase the amount they save.
22. In most countries both the consumption function and the saving functions tend to shift rapidly and often, thus they are considered to be highly unstable over time.
23. At any given level of Disposable Income, the Average Propensity to Consume of Vietnam will always be greater than the Marginal propensity.
24. In most countries as Disposable Income increases, the APC decreases.
25. Mr. Binh is a smart businessman, therefore he will purchase additional capital goods if the real rate of interest is greater than the expected rate of net profits from his investment.
26. In most countries, the investment demand schedule tends to be relatively stable over time.
27. If real interest rates increase in Viet Nam, that will cause Vietnamese households to reduce their consumption spending and increase their investment spending.
28. A more rapid rate of technological change will tend to encourage businessmen to increase their planned investment.
29. Vietnamese households will tend to invest more if they can earn higher rates of interest.
30. In Vietnamese families which have very low levels of Disposable Income, the level of their net savings may be negative.
31. If the MPS of Viet Nam is 1/4, the APS of Viet Nam must be 3/4.
32. If consumers in Viet Nam expect prices to fall in the near future, this will shift upward their consumption function.
FILL IN THE BLANKS
1. Vietnamese households can allocate their disposable income to either Consumption or ___________________________ .
2. _________________________ Consumption refers to the consumption spending that would occur even if disposable income were zero.
3. "Investment goods" refer to plant, equipment and _________________________.
4. Actual aggregate expenditure is equal to _______________________________ plus unplanned inventory accumulation.
5. The level of planned savings in Viet Nam depends primarily on the level of _______________________________________.
6. The real interest rate in Viet Nam is the nominal interest rate minus the ______________________________ rate.
7. The investment demand schedule shows the relationship between the _________________________ and investment spending in Viet Nam.
8. If Consumption spending in Viet Nam increases from 350 trillion VN dong to 365 trillion VN dong, when DI rises from 420 trillion VN dong to 440 trillion VN dong, the MPC is equal to _____________________________.
9. If Disposable Income in Viet Nam is 400 trillion VN dong and the APC is .8 the level of S is ___________________________________.
10. The level of consumption associated with zero DI is known as _______________________________ consumption.
11. At any level of Disposable Income, the ratio of Consumption to Disposable income is known as the _____________________________________________________ .
12. If the MPC in Viet Nam is .9, the MPS in Viet Nam will be ____________________.
MULTIPLE CHOICE
1. If there is no government or international sector in a very
simple economy and all saving is done by households.
a. GNP = NNP
b. GNP = NNI
c. NNP = DI
d. DI = C
2. Assuming all other things equal, an increase in the disposable
income of Viet Nam will:
a. increase C and S
b. increase C and decrease S
c. decrease C and increase S
d. decrease C and S
3. If the Disposable Income of Viet Nam increases, it is likely that:
a. both the APC and APS will rise
b. the APC will rise and the APS will fall
c. the APC will fall and the APC will rise
d. both the APC and APS will fall
4. Which of the following would not cause Viet Nam's consumption function
to shift upward?
a. an increase in expected incomes
b. an increase in the financial wealth of consumers
c. a decrease in consumer indebtedness
d. an increase in DI
5. Which of the following would be likely to cause an increase in
planned Investment in Viet Nam?
a. an increase in the rate of interest
b. an increase in the level of wages paid
c. an increase in business taxes
d. an increase in profit expectations
6. Which of the following relations is an inverse relation?
a. the relation between Consumption and Disposable Income
b. the relation between Investment and the real interest rate
c. the relation between Savings and interest rates.
d. the relation between Investment and GDP.
7. The slope of Viet Nam's consumption function is equal to:
a. the APC
b. the APS
c. the MPC