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Macroeconomics 20th Edition
McConnell Test Bank

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Chapter 10 - Basic Macroeconomic Relationships
CHAPTER 10
Basic Macroeconomic Relationships
A. Short-Answer, Essays, and Problems
1. What are the relationships among consumption, saving, and disposable income?
2. Define the consumption schedule.
3. Describe the saving schedule.
4. Explain how consumption and saving are related to disposable income in the aggregate expenditures model.
5. Fill in the table below. Describe your result.

Disposable Income Consumption Saving
$200 $210 $_____
$_____ $220 $0
$_____ $230 $10
$260 $_____ $20
$280 $_____ $30
$300 $260 $_____
6. Complete the following table assuming that (a) MPS = 1/5, (b) there is no government and all saving is
personal saving.
Level of output
and income Consumption Saving
$250 $260 $_____
275 _____ _____
300 _____ _____
325 _____ _____
350 _____ _____
375 _____ _____
400 _____ _____
personal saving.
Level of output
$100 $120 $_____
130 _____ _____
160 _____ _____
190 _____ _____
220 _____ _____
250 _____ _____
8. Differentiate between the average propensity to consume and the marginal propensity to consume.
9. What are the marginal propensity to consume (MPC) and marginal propensity to save (MPS)? How are the
two concepts related? How are the two concepts related to the consumption and saving functions?
10-1
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10. If you know the marginal propensity to consume you can determine the marginal propensity to save. How
is that possible?
11. If you know the average propensity to consume you can determine the average propensity to save. How is
that possible?
12. Suppose a family’s annual disposable income is $8000 of which it saves $2000.
(a) What is their APC?
(b) If their income rises to $10,000 and they plan to save $2800, what are their MPS and MPC?
(c) Did the family’s APC rise or fall with their increase in income?
13. Complete the accompanying table.

Level of output
and income
(GDP = DI) Consumption Saving APC APS MPC MPS
$100 $_____ −$5 _____ _____ _____ _____
125 _____ 0 _____ _____ _____ _____
150 _____ 5 _____ _____ _____ _____
175 _____ 10 _____ _____ _____ _____
200 _____ 15 _____ _____ _____ _____
225 _____ 20 _____ _____ _____ _____
250 _____ 25 _____ _____ _____ _____
275 _____ 30 _____ _____ _____ _____
300 _____ 35 _____ _____ _____ _____
(a) What is the break-even level of income? How is it possible for households to dissave at very low
income levels?
(b) If the proportion of total income consumed decreases and the proportion saved increases as income
rises, explain how the MPC and MPS can be constant at various levels of income.

Level of output
and income
$480 $_____ −$8 _____ _____ _____ _____
520 _____ 0 _____ _____ _____ _____
560 _____ 8 _____ _____ _____ _____
600 _____ 16 _____ _____ _____ _____
640 _____ 24 _____ _____ _____ _____
680 _____ 32 _____ _____ _____ _____
720 _____ 40 _____ _____ _____ _____
760 _____ 48 _____ _____ _____ _____
800 _____ 56 _____ _____ _____ _____
(a) Using the below graphs, show the consumption and saving schedules graphically.
(b) Locate the break-even level of income. How is it possible for households to dissave at very low
income levels?
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(c) If the proportion of total income consumed decreases and the proportion saved increases as income
rises, explain both verbally and graphically how the MPC and MPS can be constant at various levels of
income.
15. List four factors that could shift the consumption schedule.
16. Define wealth. What is the effect of increase in wealth on the consumption and saving schedules?
17. How does increased household borrowing affect present and future consumption?
18. How do expectations about future income effect current and future spending?
19. The expected rate of return is a guaranteed rate of return on an investment. Evaluate.
20. Suppose that real interest rates increase. What would be the likely effect on household consumption and
saving?
21. Discuss and show graphically how an increase in consumption at each level of GDP effects saving.
22. Other things being constant, what will be the effect of each of the following on disposable income (or
GDP)?
(a) An increase in the amount of liquid assets consumers are holding
(b) A sharp rise in stock prices
(c) A rapid upsurge in the rate of technological advance
(d) A sharp increase in the interest rate
10-3
23. Other things being constant, what will be the effect of each of the following on consumption and saving
schedules?
(a) Credit card companies increase the interest-free periods on their cards to compete for customers.
(b) Concern grows over rising prices.
(c) A weakening of the housing market lowers home values.
(d) Real interest rates fall.
(e) Congress officially approves the President’s plan for tax cuts.
24. Explain the difference between a movement along the consumption schedule and a shift in the consumption
schedule.
25. Use the graphs below to answer the following questions:

(a) What types of schedules do graphs A and B represent?
(b) If in graph A line A2 shifts to A3 because households consume more and this change is not due to
changing taxes, then in graph B, what would happen to line B2?
(c) If in graph B, line B2 shifts to B1 because households save less, then in graph A, what will happen to
line A2?
(d) In graph A, what has caused the movement from point A to point B on line A2?
(e) If there is a lump-sum tax increase causing line A2 to shift to A1, then in graph B, what will happen to
B2?
26.(Consider This) Use the Great Recession of 2007–2009 to describe the paradox of thrift.
27. Describe the relationship shown by the investment demand curve.
28. Consider the following investment situations.

(a) A local bookseller is considering expanding store space to increase his capacity for books. The rent for
the additional space would cost $3000 per year. The bookseller predicts that the added space will pull
in an additional profit of $4000 per year. The current interest rate is 12%. Should the bookseller
invest in the extra space?
(b) A baker is considering expanding her business by adding an additional oven to her kitchen. The new
oven would cost $700. The baker expects the new oven to bring in additional profits of $800. The
baker can borrow at a nominal interest rate of 15% and the current inflation rate is 4%. Should she
make the investment?
(c) A mechanic is considering expanding his garage. After a strong year last year, the mechanic is able to
finance the expansion from last year’s profits. The expansion itself is expected to cost $11,000. The
mechanic estimates that the additional garage will bring in revenue totaling $12,000. The mechanic is
currently receiving an interest rate of 8% on his saved profits. Should he make the investment?
10-4
29. Use the following data to answer the questions.

Cumulative amount
Expected rate of investment
of return (billions)
11% $ 55
10 75
8 90
5 105
3 150
1 190
(a) Explain why this table is essentially an investment demand schedule.

(b) If the interest rate was 8%, how much investment would be undertaken?
(c) Why is there an inverse relationship between the rate of interest and the amount of investment?
30. What is the investment demand curve?
31. List six events that could cause a shift in the investment demand curve.
32. How will the following situations affect the investment demand curve?
(a) A new type of engine is developed that is more fuel efficient.
(b) To lessen the fiscal deficit, Congress increases corporate taxes.
(c) Unplanned inventories rise to new highs.
(d) A firm decides to increase its current inventory levels.
33. Contrast planned and unplanned inventory changes. What effect do these changes have on the investment
demand curve?
34. State four factors that explain why investment spending tends to be unstable.
35. Which is the most volatile component of total spending? What four factors contribute to the volatility of
this component of total spending?
36. Compare the determinants of consumption with investment. Most economists regard investment as being
less stable than consumption. Looking at the determinants of each factor, support this contention.
37. (Consider This) Why did the lowering of real interest rates during the Great Recession not boost
investment spending?
38. Whenever there is change in spending real GDP will change by a multiple of the initial change in spending.
Explain this multiplier effect.
39. Define the multiplier. How is it related to real GDP and the initial change in spending? How can the
multiplier have a negative effect?
40. What are two key facts that serve as the rationale for the multiplier effect?
41. Explain the economic impact of an increase in the multiplier.
42. Consider the effect of the following on the multiplier.

(a) As a recession ends and recovery begins consumers are feeling less cautious about spending.
(b) As the economy moves into an expansion, spending increases.
(c) Uncertainty about national security and political relations abroad causes the public to adjust by saving
more to use in case of an economic downturn worldwide.
43. What is the relationship between the multiplier and the marginal propensities?
10-5
44. Describe the relationship between the size of the MPC and the multiplier. How does it compare to the
relationship between the size of the MPS and the multiplier?
45. Calculate the multiplier when the MPC is .5, .75, .90. What is the relationship between MPC and the
multiplier?
46. Calculate the multiplier when the MPS is .5, .25, .10. What is the relationship between MPS and the
multiplier?
47. How large is the actual multiplier?
48. (Last Word) Describe the events “Squaring the Economic Circle” and explain how they illustrate the
multiplier.
10-6
B. Answers to Short-Answer, Essays, and Problems
1. What are the relationships among consumption, saving, and disposable income?
Disposable income equals consumption plus saving. If consumption is less than disposable income, the
difference is saving. There is a positive or direct relationship between consumption and disposable income
(after-tax income) because as disposable income increases so does consumption. There is a positive
relationship between saving and disposable income because as disposable income rises so does saving.
Disposable income is the most important determinant of both consumption and saving. [text: E pp.615-
616; MA pp. 219-220]
2. Describe the consumption schedule.
The consumption schedule shows the relationship between the consumption and disposable income.
Graphically this relationship is illustrated with consumption measured on the vertical axis and disposable
income measured on the horizontal axis. If the two were equal, the relationship would follow a straight line
along the 45-degree line. However, historical data suggest that it is a direct relationship, and that
households spend a larger proportion of a small income than of a large disposable income. In other words,
consumption falls as a proportion of income as disposable income increases. [text: E p. 616; MA p. 220]
3. Describe the saving schedule.
Saving is the difference between disposable income and consumption spending. The saving schedule
shows a direct relationship between saving and disposable income. Graphically, it is depicted with saving
on the vertical axis and disposable income measured on the horizontal axis. At very low income levels,
dissaving is believed to occur and saving increases proportionally as income rises. [text: E pp. 616-618;
MA pp. 220-222]
4. Explain how consumption and saving are related to disposable income in the aggregate expenditures model.
Consumption and saving are directly related to disposable income in the aggregate expenditures model.
Consumption is positively related to disposable income, but is a proportionally greater part of low income
than of high income. In fact, at very low income levels it is probable that consumption exceeds income.
Since saving is income not spent, it is also directly related to income and will be an increasing proportion
of income as income rises. At very low levels of income when consumption exceeds income, saving will
be negative or dissaving occurs. [text: E pp. 616-618; MA pp. 220-222]
5. Fill in the table below. Describe your result.

$200 $210 $_____
$_____ $220 $0
$_____ $230 $10
$260 $_____ $20
$280 $_____ $30
$300 $260 $_____

$200 $210 −$20
$220 $220 $0
$240 $230 $10
$260 $240 $20
$280 $250 $30
$300 $260 $40
At the lowest levels of income, dissaving occurs as households spend more than they receive in disposable
income. This dissaving could occur with households liquidating their assets or borrowing money. As
10-7
income rises we see that savings increases by a greater and greater amount. This increase could occur
because higher incomes make households more able to save or the importance of saving to households
increases as income rises. [text: E pp. 616-618; MA pp. 220-222]
personal saving.
Level of output
$250 $260 $_____
275 _____ _____
300 _____ _____
325 _____ _____
350 _____ _____
375 _____ _____
400 _____ _____
Level of output
$250 $260 −$10
275 280 −5
300 300 0
325 320 5
350 340 10
375 360 15
400 380 20
[text: E pp. 616-618; MA pp. 220-222]
personal saving.
Level of output
$100 $120 $_____
130 _____ _____
160 _____ _____
190 _____ _____
220 _____ _____
250 _____ _____
Level of output
$100 $120 −$20
130 140 −10
160 160 0
190 180 10
220 200 20
250 220 30
[text: E pp. 616-618; MA pp. 220-222]
10-8
8. Differentiate between the average propensity to consume and the marginal propensity to consume.
The average propensity to consume is defined as the relationship of the amount consumed to the level of
income; it is (consumption) /(income). The marginal propensity to consume is a measure relating the
change in consumption resulting from a change in income to that change in income; it is (change in
consumption)/(change in income). [text: E p. 618; MA p. 222]
9. What are the marginal propensity to consume (MPC) and marginal propensity to save (MPS)? How are the
two concepts related? How are the two concepts related to the consumption and saving functions?
The marginal propensity to consume is the ratio of a change in consumption to the change in income which
caused that change in consumption. The marginal propensity to save is the ratio of the change in saving to
the change in income which caused that change in saving. The sum of the MPC and MPS for any change
in disposable income must always equal 1 because any fraction of a change in income which is not
consumed is saved. The MPC is the numerical value of the slope of the consumption schedule and the
MPS is the numerical value of the slope of the saving schedule. [text: E p. 618; MA p. 222]
10. If you know the marginal propensity to consume you can determine the marginal propensity to save. How
is that possible?
The marginal propensities sum to 1 (MPC + MPS = 1). Thus, if you know the value of one marginal
propensity (e.g., MPC), you can always figure out the other marginal propensity (e.g., 1 − MPC = MPS).
[text: E pp. 618-619; MA pp. 222-223]
11. If you know the average propensity to consume you can determine the average propensity to save. How is
that possible?
The average propensities sum to 1 (APC + APS = 1). Thus, if you know the value of one average
propensity (e.g., APC), you can always figure out the other average propensity (e.g., 1 − APC = APS).
[text: E pp. 618-619; MA pp. 222-223]
12. Suppose a family’s annual disposable income is $8000 of which it saves $2000.
(a) What is their APC?
(b) If income rises to $10,000 and they plan to save $2800, what are MPS and MPC?
(c) Did the family’s APC rise or fall with their increase in income?
(a) APC = 0.75; (b) MPS = 0.4; MPC = 0.6; (c) APC fell to 0.72. [text: E pp. 618-619; MA pp. 222-223]

Level of output
and income
$100 $_____ −$5 _____ _____ _____ _____
125 _____ 0 _____ _____ _____ _____
150 _____ 5 _____ _____ _____ _____
175 _____ 10 _____ _____ _____ _____
200 _____ 15 _____ _____ _____ _____
225 _____ 20 _____ _____ _____ _____
250 _____ 25 _____ _____ _____ _____
275 _____ 30 _____ _____ _____ _____
300 _____ 35 _____ _____ _____ _____
(a) What is the break-even level of income? How is it possible for households to dissave at very low
income levels?
(b) If the proportion of total income consumed decreases and the proportion saved increases as income
rises, explain how the MPC and MPS can be constant at various levels of income.
Level of output
10-9
and income
$100 $105 −$5 1.05 −.05 0.8 0.2
125 125 0 1.00 .00 0.8 0.2
150 145 5 0.97 .03 0.8 0.2
175 165 10 0.94 .06 0.8 0.2
200 185 15 0.925 .075 0.8 0.2
225 205 20 0.91 .09 0.8 0.2
250 225 25 0.90 .10 0.8 0.2
275 245 30 0.89 .11 0.8 0.2
300 265 35 0.88 .12 0.8 0.2
(a) The break-even level of income is 125 where saving equals zero. Households dissave by borrowing or
by dipping into accumulated savings.
(b) The MPC and MPS represent the slopes of the consumption and savings schedules, respectively. The
fact that MPC and MPS are constant means that the schedules will be straight-line graphs. However,
the slope can be constant and still not be a constant proportion of income as represented on the
horizontal axis. In fact, the only time the MPC and the APC would be the same would be along the
45-degree line where the slope is equal to 1 and the ratio of spending to income is equal to 1 at all
levels. [text: E pp. 618-619; MA pp. 222-223]

Level of output
and income
$480 $_____ −$8 _____ _____ _____ _____
520 _____ 0 _____ _____ _____ _____
560 _____ 8 _____ _____ _____ _____
600 _____ 16 _____ _____ _____ _____
640 _____ 24 _____ _____ _____ _____
680 _____ 32 _____ _____ _____ _____
720 _____ 40 _____ _____ _____ _____
760 _____ 48 _____ _____ _____ _____
800 _____ 56 _____ _____ _____ _____
(a) Using the below graphs, show the consumption and saving schedules graphically.
(b) Locate the break-even level of income. How is it possible for households to dissave at very low
income levels?
(c) If the proportion of total income consumed decreases and the proportion saved increases as income
rises, explain both verbally and graphically how the MPC and MPS can be constant at various levels of
income.
Level of output
and income
$480 $488 −$8 1.02 −0.2 0.8 0.2
520 520 0 1.00 0.0 0.8 0.2
560 552 8 0.99 0.1 0.8 0.2
600 584 16 0.99 0.3 0.8 0.2
640 616 24 0.96 0.4 0.8 0.2
680 648 32 0.95 0.5 0.8 0.2
720 680 40 0.94 0.6 0.8 0.2
760 712 48 0.94 0.6 0.8 0.2
800 744 56 0.93 0.7 0.8 0.2
10-10
(a) See graphs.
(b) The break-even level of income is 520 where saving equals zero. Households dissave by borrowing or
by dipping into accumulated savings. [text: E pp. 549-551; MA pp. 193-195]
(c) The MPC and MPS represent the slopes of the consumption and savings schedules respectively. The
fact that MPC and MPS are constant means that the schedules will be straight-line graphs. However,
the slope can be constant and still not be a constant proportion of income as represented on the
horizontal axis. In fact, the only time the MPC and the APC would be the same would be along lines
emanating from the origin. [text: E pp. 618-619; MA pp. 222-223]
15. List four factors that could shift the consumption schedule.
Shifts in the consumption schedule could be caused by any of the nonincome determinants of consumption
and saving. This includes changes in any of the following: wealth, expectations, real interest rates, and
household borrowing. [text: E pp. 619-620; MA pp. 223-224]
16. Define wealth. What is the effect of increase in wealth on the consumption and saving schedules?
The wealth of a household is the difference between the assets that it owns and the dollar amount of its
liabilities. When wealth increases, it shifts the consumption schedule upward as people consume more at
each level of disposable income. There is an opposite effect on saving. The saving schedule shifts
downward at each level of disposable income because people save less. [text: E p. 619; MA p. 224]
17. How does increased household borrowing affect present and future consumption?
Increased borrowing will increase current consumption possibilities, which shift the consumption schedule
upward. But borrowing reduces wealth by increasing debt, which in turn reduces future consumption
possibilities because the borrowed money must be repaid. [text: E pp. 619-620; MA pp. 223-224]
18. How do expectations about future income effect current and future spending?
When households expect future income to increase they are more likely to consume a greater portion of the
disposable income now. This shifts the current consumption schedule up and the current savings schedule
down. A household assumes that the future income will allow them to consume a greater amount then,
lessening the need to save today. [text: E pp. 620; MA pp. 224]
19.The expected rate of return is a guaranteed rate of return on an investment. Evaluate.
10-11
The expected rate of return is the increase in profit a firm anticipates it will obtain by making a given
investment. There is no guarantee that this rate of return will be achieved. Investment involves risk, the
degree of riskiness varies by investment. [text: E p. 620; MA p. 224]
20. Suppose that real interest rates increase. What would be the likely effect on household consumption and
saving?
A rise in real interest rates would raise the price of borrowing for households, so consumption would likely
decline, especially consumption of products usually bought on credit such as homes and automobiles. A
rise in interest rates increases the rate of return earned on savings, making saving more attractive, so
savings would likely increase. [text: E p. 620; MA p. 224]
21. Discuss and show graphically how an increase in consumption at each level of GDP effects saving.
Typically if a household consumes more at each level of real GDP, they are saving less. A downward shift
in the consumption curve corresponds with an upward shift in the savings curve. The reverse is also true, an
upward shift in the consumption curve corresponds with a downward shift the supply curve.
[text: E p. 622; MA p. 222]
22. Other things being constant, what will be the effect of each of the following on disposable income (or real
GDP)?
(a) An increase in the amount of liquid assets consumers are holding
(b) A sharp rise in stock prices
(c) A rapid upsurge in the rate of technological advance
(d) A sharp increase in the real interest rate
(a) This should increase disposable income because an increase in consumer wealth would lead to an
increase in consumer spending which would shift the consumption schedule upward to a higher
equilibrium output level.
(b) The probable effect of a sharp rise in stock prices would be to increase shareholder purchases as a
result of a rise in wealth, thus shifting the consumption schedule upward and increasing the
equilibrium level of GDP. It also could encourage business investment with funds gained by issuing
new shares of stock at the now higher prices. This would also tend to increase GDP.
10-12
(c) This should increase GDP because of the impact on new investment spending and possible increased
consumer purchases of goods having the new technology. The consumption schedule will shift
upward and real quantity will rise.
(d) A sharp increase in the real interest rate would limit consumer durables purchases and also limit
investment spending. Both of these events would cause a downward shift in the consumption schedule
causing a decrease in GDP. One could even argue that higher real interest rates raise production costs
and shift the aggregate supply curve leftward as well, further leading to the GDP decline.
[text: E pp. 620-621; MA pp. 224-225]
23. Other things being constant, what will be the effect of each of the following on consumption and saving
schedules?
(a) Credit card companies increase the interest-free periods on their cards to compete for customers.
(b) Concern grows over rising prices.
(c) A weakening of the housing market lowers home values.
(d) Real interest rates fall.
(e) Congress officially approves the President’s plan for tax cuts.
(a) An extension of interest-free periods on credit cards makes credit cheaper for households, so
household borrowing will increase. This increase will cause the consumption schedule to shift upward,
as households can afford to consume more. Correspondingly the savings schedule would shift
downward.
(b) Expectations of rising prices would likely increase current consumption, as expected returns on savings
decrease due to expected future inflation. This means that the consumption schedule would shift up
and the savings schedule would shift down.
(c) A reduction of housing prices lowers household wealth, reducing consumption and promoting savings.
This will cause the consumption schedule to shift downward and the savings schedule to shift upward.
(d) A reduction in real interest rates decreases the cost of borrowing, so borrowing and subsequently
consumption will increase, shifting the consumption schedule upward. Lower real interest rates
decrease the attractiveness of savings, causing savings to decline and the savings schedule to shift
downward.
(e) A cut in taxes increases household funds available for both savings and consumption, meaning that
both the consumption and saving schedules will shift upward.
[text: E pp. 619-620; MA pp. 223-224]
24. Explain the difference between a movement along the consumption schedule and a shift in the consumption
schedule.
A movement from one point to another on the consumption schedule is a change in the amount consumed.
It is caused solely by a change in disposable income. By contrast, a shift in the consumption schedule is
the result of a change in one of the nonincome determinates of consumption such as a change in wealth,
expectations, taxation, or household borrowing. If a household decided to consume more at each level of
disposable income, the consumption schedule will shift upward. [text: E pp. 620-621; MA pp. 224-225]
25. Use the graphs below to answer the following questions:

(a) What types of schedules do graphs A and B represent?
(b) If in graph A line A2 shifts to A3 because households consume more and this change is not due to
changing taxes, then in graph B, what would happen to line B2?
(c) If in graph B, line B2 shifts to B1 because households save less, then in graph A, what will happen to
line A2?
(d) In graph A, what has caused the movement from point A to point B on line A2?
(e) If there is a lump-sum tax increase causing line A2 to shift to A1, then in graph B, what will happen to
B 2?
10-13
(a) Graph A represents the consumption schedule and B represents the saving schedule.
(b) If consumption rises at each level of income, then saving must decline at each level so B2 will shift
down.
(c) The situation is the reverse of part (b). Line A2 would rise if B2 falls. Consumption rises when saving
falls.
(d) Since it is a movement along the curve rather than a shift in the curve, the level of disposable income
must have increased.
(e) A tax increase will lower both consumption and saving schedules because disposable income has been
reduced at each level of output.
[text: E pp. 620-621; MA pp. 224-225]
26. (Consider This) Use the Great Recession of 2007–2009 to describe the paradox of thrift.
During the Great Recession of 2007–2009 there was a “reverse wealth effect” because as wealth declined
during the recession, people consumed less and saved more. Such a situation creates a paradox of thrift in
which more saving helps individual household budgets, but as people cut back on their consumption and
increase their saving, the collective effect on the economy is an adverse one that worsened the recession.
[text: E p. 621; MA p. 225]
27. Describe the relationship shown by the investment demand curve.
The investment demand curve relates investment to the real rate of interest and the expected rate of return.
Graphically the interest rate and expected rate of return are measured on the vertical axis and the amount of
investment is measured on the horizontal axis. The investment demand curve has a negative slope
reflecting the inverse relationship between the interest rate (the price of investing) and the aggregate
quantity of investment goods demanded. [text: E pp. 622-623; MA pp. 226-227]
28. Consider the following investment situations.

(a) A local bookseller is considering expanding store space to increase his capacity for books. The rent for
the additional space would cost $3000 per year. The bookseller predicts that the added space will pull
in an additional profit of $4000 per year. The current interest rate is 12%. Should the bookseller
invest in the extra space?
(b) A baker is considering expanding her business by adding an additional oven to her kitchen. The new
oven would cost $700. The baker expects the new oven to bring in additional profits of $800. The
baker can borrow at a nominal interest rate of 15% and the current inflation rate is 4%. Should she
make the investment?
(c) A mechanic is considering expanding his garage. After a strong year last year, the mechanic is able to
finance the expansion from last year’s profits. The expansion itself is expected to cost $11,000. The
mechanic estimates that the additional garage will bring in revenue totaling $12,000. The mechanic is
currently receiving an interest rate of 8% on his saved profits. Should he make the investment?
(a) Yes. The additional space would bring a profit of $1000 or an expected rate of return of 33.3%
compared to the marginal cost of a 12% interest rate. The total rate of return for the project would be
21.3%, a substantial return on his investment.
10-14
(b) Yes. The new oven would bring additional profits of $100 or an expected rate of return of 14.3% the
first year of operation. Though the nominal interest rate to borrow is greater than the rate of return at
15%, when adjusted for inflation the real interest rate is only 11%. This would bring a total return of
3.3% and thus the baker should invest in the new oven.
(c) No. Though the expansion would appear to have an expected profit of $1000 or rate of return of 9.1%,
the mechanic needs to account for the opportunity cost of not saving his profits at an interest rate of
8%. This opportunity cost would be lost returns of $880 ($11,000  8%). This brings the total cost of
the expansion to $11,880. Total profits are then only $120 or a rate of return of 1.01%. The mechanic
should not make the investment.
[text: E pp. 622-623; MA pp. 226-227]
29. Use the following data to answer the questions.

Cumulative amount
Expected rate of investment
of return (billions)
11% $ 55
10 75
8 90
5 105
3 150
1 190
(a) Explain why this table is essentially an investment demand schedule.

(b) If the interest rate was 8%, how much investment would be undertaken?
(c) Why is there an inverse relationship between the rate of interest and the amount of investment?
(a) The investment demand schedule gives the amount of investment that would be undertaken at various
rates of interest. The rate of interest that an investor would be willing to pay for any amount of
investment will not exceed its expected rate of net profit. Therefore, the expected rate of profit
determines the interest rate (or price) that investors would be willing to pay for various amounts of
investment and this is the definition of an investment demand schedule.
(b) $90 billion
(c) The inverse relationship stems from the equality of the expected rate of profit with the interest rate at
each level of investment as explained in part (a). There are fewer types of investment that yield a large
expected net profit and more and more investments that will yield a lower rate of return. Therefore, at
high rates of interest there is a smaller amount of investment that will be undertaken because fewer
investments yield an expected return high enough to cover the high interest rate. As the rate declines,
more and more investments will yield enough return to cover the lower rates of interest.
[text: E pp. 622-623; MA pp. 226-227]
30. What is the investment demand curve?
The investment-demand curve shows the relationship between the real interest rate and the level of
investment spending. The relationship is an inverse one—the lower the interest rate, the greater the
investment spending—which means that the investment-demand curve is downsloping. This curve can also
be shifted by six factors that can change the expected rate of return on investment. [text: E pp. 223; MA
pp. 227]
31. List six events that could cause a shift in the investment demand curve.
Six events would result from changes in the determinants of investment demand. For example, changes in
the price, cost of operation, or maintenance of particular investment goods could cause the curve to shift;
changes in business taxes favoring or penalizing investment could cause it to shift; a technological change
favoring new investment could cause a shift; changes in the stock of capital goods on hand will cause the
existing demand curve to shift; planned changes that firms desire to make to their inventory levels will
cause the investment demand curve to shift; and changing expectations about future profits from
investment would have an effect. [text: E pp. 623-626; MA pp. 227-230]
32. How will the following situations affect the investment demand curve?
10-15
(a) A new type of engine is developed that is more fuel efficient.

(b) To lessen the fiscal deficit, Congress increases corporate taxes.
(c) Unplanned inventories rise to new highs.
(d) A firm decides to increase its current inventory levels.
(a) This technological advance will shift the investment demand curve outward. A more fuel efficient
engine will help companies save money on fuel costs, allowing them to invest more in other areas.
(b) Higher taxes on businesses will leave them less money to invest in projects and the investment demand
curve will shift inward.
(c) A high level of unplanned inventories means that firms have a large stock of capital goods and thus
have little incentive to invest in more capital goods, so investment will decline and the investment
demand curve will shift inward.
(d) The decision made by the firm will have a positive effect on current investment and shift the
investment demand curve to the right.
[text: E pp. 623-626; MA pp. 227-230]
33. Contrast planned and unplanned inventory changes. What effect do these changes have on the investment
demand curve?
The difference between planned and unplanned inventory changes is whether or not a firm makes a
decision to increase or decrease its inventory. Planned inventory changes represent increases or decreases
in inventory that have been decided by a firm. For example, an increase in planned inventory levels
increases investment demand. Unplanned inventory changes occur unexpectedly and have an inverse effect
on the investment demand curve. When inventory levels increase unexpectedly firms decrease their
investment and vice versa. [text: E p. 625; MA p. 229]
34. State four factors that explain why investment spending tends to be unstable.
Investment spending is based to a large extent on expectations about future profitability and this can vary
significantly from period to period. Technological changes affect investment spending and these changes
are not predictable in their timing. Investment goods tend to be long lasting and “lumpy” in nature; that is,
once a capital good is purchased it lasts a long time and the expenditure will not be repeated on a frequent,
regular basis. Furthermore, this type of expenditure is usually large, so any changes tend to be substantial
on a firm-by-firm basis. Expectations and profits are both highly variable. Actual profits may not meet
expectations and this can affect expectations in the future. Expectations are also based on many different
external factors. [text: E pp. 626-627; MA pp. 230-231]
35. Which is the most volatile component of total spending? What four factors contribute to the volatility of
this component of total spending?
The most volatile component of aggregate spending is investment. In fact, investment generates most of
the fluctuation in employment and output that takes place over the course of a business cycle. The four
factors that contribute to its volatility are the durability of capital goods, the irregularity of technological
progress that generates innovation, and variability in both profits and expectations. [text: E pp. 626-627;
MA pp. 230-231]
36. Compare the determinants of consumption with investment. Most economists regard investment as being
less stable than consumption. Looking at the determinants of each factor, support this contention.
The nonincome determinants of the consumption schedule are consumer wealth, expectations, real interest
rates, household borrowing, and taxation. The determinants of investment are price of investment goods
and their maintenance and operating costs, business taxes, technological change, stock of capital goods on
hand, and expectations. Comparing the two lists there are some similarities. For example, both include
expectations, related price levels, and relevant taxes. However, the technological change and the stock of
capital goods on hand have no analogy in the consumption determinants.
These latter two determinants of investment support the contention of economists that the investment
schedule is more unstable than the consumption schedule. Technological change is difficult to predict and
certainly its impact would vary depending on the extent of the change. The stock of capital goods on hand
10-16
is a result of previous investment and because of the nature of most capital goods, they can be made to last
for a long period of time. Once new capital spending occurs, it is “lumpy” in the sense that it will not be
repeated gradually, but only again when the particular capital good wears out or becomes obsolete. Only
the durable goods component of consumption is similar, but most of consumer spending is of the more
immediate type such as nondurable goods and services which are primarily related to income and would
not vary greatly from period to period for most consumers.
The basic determinant of consumption is the level of income, but nonincome factors include wealth,
expectations, real interest rates, household borrowing, and taxation. Aside from a drastic change in
government tax or transfer policies, the consumption schedule is quite stable. That is, changes in
disposable income are accompanied by predictable changes in consumption spending. Furthermore the
other factors are quite diverse and tend to be self-canceling across the population.
The two basic factors determining the level of investment spending are the expected rate of return and the
real interest rate. Since the former is based on expectations and the latter based to a large extent on
monetary policy, there is potential for wide variation. Add to this the fact that investment goods are usually
quite durable, and new investment can be postponed depending on expectations, or once it is made there
will be a period of time before the new capital goods will need to be replaced. Also the fact that
innovations occur irregularly leads to the inability to plan for gradual investment in innovative technology.
Finally, actual current profits are often not as expected, so businesses can be expected to shift their
investment plans from year to year. [text: E pp. 619-620, 626-627; MA pp. 223-224, 230-231]
37. (Consider This) Why did the lowering of real interest rates during the Great Recession not boost investment
spending?
Given an investment demand curve that is linear and downsloping, a drop in real interest rates should have
increased the quantity demanded for investment. That inverse relationship, however, between real interest
rates and the quantity of investment demanded assumes that other factors do not change. During the Great
Recession of 2007–2009, other factors such as a decline in expected returns from investment shifted the
investment demand curve downward, thus offsetting the increase in the quantity of investment demanded
from a lower real interest rate. [text: E p. 626; MA p. 230]
38. Whenever there is change in spending real GDP will change by a multiple of the initial change in spending.
Explain this multiplier effect.
The economy is characterized by repetitive, continuous flows of expenditures and income through which
dollars spent by one group are received as income by another group. Any change in spending will cause a
chain reaction where a group whose income changes because of the spending change will in turn have a
new level of spending which reflects their new level of income. When their spending increases or
decreases, another group will find its income affected. Their spending will change by a fraction of that
amount and so on. The end result of the initial change in spending will be several rounds of changes in
income and spending so that the final impact on the economy’s GDP is a multiple of the original change in
spending. [text: E p. 628; MA p. 232]
39. Define the multiplier. How is it related to real GDP and the initial change in spending? How can the
multiplier have a negative effect?
The multiplier is simply the ratio of the change in real GDP to the initial change in spending. Multiplying
the initial change in spending by the multiplier gives you the amount of change in real GDP. The
multiplier effect can work in a positive or a negative direction. An initial increase in spending will result in
a larger increase in real GDP, and an initial decrease in spending will result in a larger decrease in real
GDP. [text: E p. 628; MA p. 232]
10-17
40. What are two key facts that serve as the rationale for the multiplier effect?
First, the economy has continuous flows of expenditures and income in which income received by one
person comes from money spent by another person who in turn receives income from the spending of
another person, and so forth. Second, any change in income will cause both consumption and saving to
vary in the same direction as the initial change in income, and by a fraction of that change. The fraction of
the change in income that is spent is called the marginal propensity to consume (MPC). The fraction of the
change in income that is saved is called the marginal propensity to save (MPS). The significance of the
multiplier is that a small change in investment plans or consumption-saving plans can trigger a much larger
change in the equilibrium level of GDP. [text: E p. 628; MA p. 232]
41. Explain the economic impact of an increase in the multiplier.
The multiplier magnifies the fluctuations in economic activity initiated by changes in investment spending,
net exports, government spending, or consumption spending. The larger the multiplier the greater will be
the impact of any changes in spending on real GDP. [text: E pp. 628-629; MA pp. 232-233]
42. Consider the effect of the following on the multiplier.

(a) As a recession ends and recovery begins consumers are feeling less cautious about spending.
(b) As the economy moves into an expansion, spending increases.
(c) Uncertainty about national security and political relations abroad causes the public to adjust by saving
more to use in case of an economic downturn worldwide.
(a) Given that consumers are feeling less cautious about spending, the marginal propensity to consume
will likely increase. Looking at the relationship between the multiplier and marginal propensity to
consume, we can see that as MPC rises, the multiplier will rise.
(b) This situation does not necessarily translate into an increase in the marginal propensity to consume.
Incomes may have simply risen, while the MPC remained constant and spending could have risen. So,
in this case there is likely no change in the multiplier.
(c) The increase in saving due to national and political uncertainty will cause the marginal propensity to
save to increase. Given the relationship between the multiplier and MPS, the increase in MPS will
cause the multiplier to decline.
[text: E pp. 628-629; MA pp. 232-233]
43. What is the relationship between the multiplier and the marginal propensities?
The multiplier is directly related to the marginal propensities. By definition, the multiplier is related to the
marginal propensity to save because it equals 1 /MPS. Thus, the multiplier and the MPS are inversely
related. The multiplier is also related to the marginal propensity to consume because it also equals 1 / (1 −
MPC). [text: E pp. 629-630; MA pp. 233-234]
44. Describe the relationship between the size of the MPC and the multiplier. How does it compare to the
relationship between the size of the MPS and the multiplier?
The size of the MPC and the multiplier are directly related. The size of the MPS and the multiplier are
inversely related. In equation form, the multiplier = 1 /MPS, or the multiplier = 1 /(1 − MPC). [text: E pp.
629-630; MA pp. 233-234]
45. Calculate the multiplier when the MPC is .5, .75, .90. What is the relationship between MPC and the
multiplier?
When MPC = .5, the multiplier is 2. When MPC = .75, the multiplier is 4. When MPC = .90, the
multiplier is 10. The relationship between MPC and the multiplier is direct. As the MPC increases, so
does the multiplier [multiplier = 1 /MPC]. [text: E pp. 629-630; MA pp. 233-234]
10-18
46. Calculate the multiplier when the MPS is .5, .25, .10. What is the relationship between MPS and the
multiplier?
When MPS = .5, the multiplier is 2. When MPS = .25, the multiplier is 4. When MPS = .10, the multiplier
is 10. The relationship between MPS and the multiplier is inverse. As the MPS decreases, so the multiplier
increases [multiplier = 1 /(1 − MPS)]. [text: E pp. 629-630; MA pp. 233-234]
47. How large is the actual multiplier?
The basic multiplier (1 /MPS) in the text reflects only the leakage of income into saving. There can also be
other leakages of income from taxes or imports. It is better to think of the denominator for the multiplier in
more general terms as “the fraction of the change in income which leaks or is diverted from the income
stream.” When all these leakages—saving, taxes, and import spending—are added to the denominator of
the multiplier, they reduce the size of the multiplier effect. The Council of Economic Advisor has
estimated that the actual multiplier for the United States is about 2. [text: E p. 630; MA p. 234]
48. (Last Word) Describe the events “Squaring the Economic Circle” and explain how they illustrate the
multiplier.
Humorist Art Buchwald illustrates the multiplier with this funny essay that shows how the effect of one
economic event on one party has an effect on a second party. These effects on the second party, in turn,
have an effect on a third party, and so forth, creating a ripple throughout the economy. These related and
multiple effects serve to illustrate the multiplier.
Hofberger, a Chevy salesman in Tomcat, VA, called up Littleton of Littleton Menswear & Haberdashery,
and told him that a new Nova had been set aside for Littleton and his wife. Littleton said he was sorry, but
he couldn’t buy a car because he and Mrs. Littleton were getting a divorce. Soon afterward, Bedcheck the
painter called Hofberger to ask when to begin painting the Hofbergers’ home. Hofberger said he couldn’t,
because Littleton was getting a divorce, not buying a new car, and, therefore, Hofberger could not afford to
paint his house. When Bedcheck went home that evening, he told his wife to return their new television set
to Gladstone’s TV store. When she returned it the next day, Gladstone immediately called his travel agent
and canceled his trip. He said he couldn’t go because Bedcheck returned the TV set because Hofberger
didn’t sell a car to Littleton because Littletons are divorcing. Sandstorm, the travel agent, tore up
Gladstone’s plane tickets, and immediately called his banker, Gripsholm, to tell him that he couldn’t pay
back his loan that month. When Rudemaker came to the bank to borrow money for a new kitchen for his
restaurant, the banker told him that he had no money to lend because Sandstorm had not repaid his loan yet.
Rudemaker called his contractor, Eagleton, who had to lay off eight men. General Motors announced it
would give a rebate on its new models. Hofberger called Littleton to tell him that he could probably afford
a car even with the divorce. Littleton said that he and his wife had made up and were not divorcing. His
business, however, was so lousy that he couldn’t afford a car now. His regular customers, Bedcheck,
Gladstone, Sandstorm, Gripsholm, Rudemaker, and Eagleton had not been in for over a month. [text: E p.
631; MA p. 235]
10-19
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Koonunga cursor, 117;
distribution, 211
Koonungidae, 117
Korschelt and Heider, on neuromeres in Arachnids, 263
Kowalevsky, 513
Kraepelin, 303, 306, 312 n., 428
Kramer, 460
Kröyer, 504, 526
Labdacus, 418
Labochirus, 312
Labrum, of Trilobites, 233
Labulla, 406
Laches, 399
Lachesis, 399
Lacinia mobilis, 114
Laemodipoda, 139
Laenger, on the frequency of human Pentastomids, 494
Lakes, characters of fauna of, 206;
English, 207, 208;
Baikal, 212;
Great Tasmanian, 216
Lambrus, 192, 193;
L. miersi, 193
Lamproglena, 68
Lampropidae, 121
Lamprops, 121
Langouste, 165
Laniatores, 448
Lankester, on Crustacean limb, 9;
on classification of Arachnids, 258, 277;
on Limulus, 274, 305
Laophonte littorale, 62;
L. mohammed, 62
Laseola, 404
Lathonura, 53
Latona, 51
Latreille, 385, 408 n., 412, 504, 526
Latreillia, 185;
distribution, 205
Latreillopsis, 185;
L. petterdi, 185
Latreutes ensiferus, habitat, 202
Latrodectus, 362, 403;
L. 13–guttatus, 364, 403;
L. mactans, 362, 363, 403;
L. scelio, 403
Laura, 93;
L. gerardiae, 93
Laurie, 309 n., 310, 311
Leach, 526
Lecythorhynchus armatus, 535
Leeuwenhoek, on desiccation in Tardigrada, 484
Leionymphon, 534
Lendenfeld, von, 512, 523
Lepas, 87;
metamorphosis, 80;
anatomy, 82;
L. australis, Cypris, 82;
L. fascicularis, Nauplius, 81;
L. pectinata, pupa, 82
Lephthyphantes, 327, 406
Lepidurus, 23, 24, 36;
heart, 29;
L. glacialis, range, 34;
L. patagonicus, 36;
L. productus, 36;
carapace, 20;
telson, 23;
L. viridis, 36
Leptestheria, 36;
L. siliqua, 37
Leptochela, 163
Leptochelia, 122;
L. dubia, dimorphism, 123
Leptoctenus, 418
Leptodora, 54;
appendages, 42;
alimentary canal, 43;
ovary, 44, 45;
L. hyalina, 54
Leptodoridae, 54
Leptoneta, 393
Leptonetidae, 393
Leptopelma, 389
Leptoplastus, 247
Leptostraca, 111, 242;
defined, 6;
segmentation, 7
Lernaea, 74;
L. branchialis, 74, 75
Lernaeascus, 73
Lernaeidae, 74
Lernaeodiscus, 95
Lernaeopoda salmonea, 76
Lernaeopodidae, 75
Lernanthropus, 68;
blood, 30, 68
Lernentoma cornuta, 72
Leuckart, on Pentastomida, 490, 492;
on development of, 494;
on sub-genera of, 495
Leuckartia flavicornis, 59
Leucon, 121
Leuconidae, 121
Leucosia, 188
Leucosiidae, 188;
respiration, 187;
habitat, 199
Leydigia, 53
Lhwyd, Edward, on Trilobites, 221
Lichadidae, 252
Lichas, 222, 252
Lichomolgidae, 70
Lichomolgus, 71;
L. agilis, 71;
L. albeus, 71
Ligia oceanica, 128
Ligidium, 129
Lilljeborg, on Cladocera, 51 n.
Limnadia, 21, 22, 36;
L. lenticularis, 22, 36
Limnadiidae, 20, 23, 28, 29, 36
Limnetis, 20, 21, 22, 36;
L. brachyura, 21, 24, 36
Limnocharinae, 472
Limnocharis aquaticus, 472
Limulus, 256, 292;
nervous system, 257;
classification, 260, 276;
segmentation, 260, 261, 262, 266, 270, 272;
appendages, 263;
habits, 265, 271;
food, 267;
digestive system, 268;
circulatory system, 268;
respiratory system, 269;
excretory system, 270;
nervous system, 270, 272;
eggs and larvae, 274, 275;
ecdysis, 274;
used as food, 275–6;
affinities, 277;
fossil, 277;
L. gigas, 276;
L. hoeveni, 277;
L. longispina, 264, 274;
L. moluccanus, 264, 274, 276, 277;
L. polyphemus, 261, 262, 264, 271;
L. rotundicauda, 275, 277;
L. tridentatus, 276
Lindström, on facial suture of Agnostus and Olenellus, 225;
on eyes of Trilobites, 228 f.;
on blind Trilobites, 231 f.;
on maculae of Trilobites, 233
Lingua, 459
Linguatula, 488 n., 495;
L. pusilla, 496;
L. recurvata, 496;
L. subtriquetra, 496;
L. taenioides, 489, 492, 493, 494, 496;
frequency of, 489;
larvae of, 489, 494;
hosts of, 496
Linnaeus, 408 n., 502
Linyphia, 406;
L. clathrata, 406;
L. marginata, 406;
L. montana, 406;
L. triangularis, 406
Linyphiinae, 405
Liobunum, 447, 450
Liocraninae, 397
Liocranum, 397
Liphistiidae, 386
Liphistioidae, 383
Liphistius, 317, 383, 385, 386;
L. desultor, 386
Liriopsidae, 130
Lispognathus thompsoni, eyes, 149
Lister, M., 341, 342
Lithodes, 181;
L. maia, 176, 177, 178
Lithodidae, 181;
evolution of, 176 f.
Lithodinae, 181;
distribution, 199, 201
Lithoglyptes, 92;
L. varians, 93
Lithotrya, 87;
L. dorsalis, 87
Lithyphantes, 404
Littoral region, of sea, 197;
of lakes, 206
Liver (gastric glands), of Crustacea, 14;
of Branchiopods, 29;
of Limulus, 268;
of Arachnids, 304 f., 331
Lobster, distribution, 199;
Mysis stage, 153;
natural history, 154 f.
Lockwood, on habits of Limulus, 265, 271
Loeb, 525 n.
Loman, 331, 514, 525
Lönnberg, 425
Lophocarenum insanum, 405
Lophogaster, 119
Lophogastridae, 113, 114, 119
Loricata, 165
Lounsbury, 456, 461
Love-dances, among spiders, 381
Lovén, on Trilobites, 226
Loxosceles, 393
Lubbock, 375
Lucas, 364
Lucifer, 162
Lung-books, 297, 308, 336;
origin of, 305
Lupa, 191;
L. hastata, 191;
resemblance to Matuta, 187, 189
Lycosa, 417;
L. arenicola, 357;
L. carolinensis, turret of, 357;
L. fabrilis, 417;
L. ingens, 418;
L. narbonensis, 361, 366;
L. picta, 357, 372, 417;
L. tigrina, 357, 369
Lycosidae, 359, 375, 381, 417
Lydella, 479, 485;
L. dujardini, 477, 486
Lynceidae, 53;
alimentary canal, 43;
winter-eggs, 48;
reproduction, 49
Lyncodaphniidae, 53
Lyonnet, 319, 320
Lyra, 328
Lyriform organs, 325, 422
Lysianassa, 137
Lysianassidae, 137
Lysianax punctatus, commensal with hermit-crab, 172
M‘Cook, 334, 339, 340, 346, 350, 352 n., 365 n., 366, 367 n., 369 n.
M‘Coy, F., on facial suture of Trinucleus, 226;
on free cheek of Trilobites, 227
M‘Leod, 336 n.
Macrobiotus, 480, 485;
M. ambiguus, 487;
M. angusti, 486;
M. annulatus, 486;
M. coronifer, 487;
M. crenulatus, 487;
M. dispar, 487;
M. dubius, 487;
M. echinogenitus, 487;
M. harmsworthi, 487;
M. hastatus, 487;
M. hufelandi, 480, 482, 483, 486;
M. intermedius, 486;
M. islandicus, 487;
M. macronyx, 477, 483, 487;
M. oberhäuseri, 486;
M. orcadensis, 487;
M. ornatus, 487;
M. papillifer, 487;
M. pullari, 487;
M. sattleri, 487;
M. schultzei, 480;
M. tetradactylus, 478;
M. tuberculatus, 487;
M. zetlandicus, 486
Macrocheira kämpferi, 192
Macrohectopus (= Constantia), 138, 212
Macrophthalmus, 196
Macrothele, 390
Macrothrix, 37, 53
Macrura, 153 f.
Macula, 233
Maia, 193;
distribution, 205;
M. squinado, 192;
alimentary canal, 15
Maiidae, 193
Malacostraca, 110 f.;
defined, 6;
classification, 113, 114;
fresh-water, 210 f.
Malaquin, on Monstrilla, 63 n.
Male Spider, devoured by female, 380
Malmignatte, 364, 403
Malpighian tubes or tubules, 12, 257, 311, 331, 427, 434, 460
Mandibles, of Crustacea, 8;
of Arachnida, 319
Mange, 465
Maracaudus, 449
Margaropus, 469
Marine Spiders, 415
Marpissa, 421;
M. muscosa, 420;
M. pomatia, 421
Martins, Fr., 502
Marx, 350
Masteria, 390
Mastigoproctus, 312
Mastobunus, 449
Matthew, G. F., on development of Trilobites, 238
Matuta, 188;
habitat, 198;
M. banksii, 187
Maxilla, 8;
of Decapoda, 152;
of Spiders, 321
Maxillary gland, 13
Maxillipede, 8;
of Copepoda, 55, 78;
of Malacostraca, 113;
of Zoaea, 180, 181, 182
Mecicobothrium, 391
Mecostethi, 443, 447, 448
Mecysmauchenius segmentatus, 411
Meek, 363
Megabunus, 450, 451
Megacorminae, 308
Megacormus granosus, 308
Megalaspis, 222, 249
Megalopa, compared to Glaucothoe, 180;
of Corystes cassivelaunus, 183
Mégnin, 455, 457
Megninia, 466
Meinert, 522 n.
Meisenheimer, 511 n.
Melanophora, 397
Mena-vodi, 362
Menge, 319, 368, 385
Menneus, 410
Mermerus, 449
Merostomata, 258, 259 f.
Mertens, Hugo, 524 n.
Mesochra lilljeborgi, 62
Mesonacis, 247;
M. asaphoides, larva, 240
Mesosoma, of Arachnida, 256;
of Limulus, 260, 263;
of Eurypterus, 288;
of Scorpion, 302
Mesothelae, 386
Meta segmentata, 408
Metamorphosis, of Cirripedia, 80;
of Sacculina, 97;
of Epicarida, 130, 133, 135;
of Squilla, 142, 143;
of Euphausia, 144;
discovery of, in Decapoda, 153;
of Lobster, 156;
of Crayfish, 157;
of Peneus, 159;
primitive nature of, in Macrura, 161;
of Loricata, 165, 166;
of Hermit-crab, 179;
of Brachyura, 181, 182;
of Dromiacea, 182;
of Trilobites, 239;
of Limulus, 275;
of Pseudoscorpions, 435;
of Acarina, 462;
of Pentastomida, 493 f.;
of Pycnogons, 521 f.
Metasoma, of Arachnida, 256;
of Limulus, 260, 263;
of Eurypterus, 289;
of Scorpion, 303
Metastigmata, 467
Metastoma, of Trilobites, 234;
of Eurypterida, 287, 292
Metazoaea, 182
Metopobractus rayi, 405
Metopoctea, 452
Metridia, 59;
M. lucens, distribution, 203
Metronax, 398
Metschnikoff, 435 n.
Miagrammopes, 411
Miagrammopinae, 411
Micaria, 397;
M. pulicaria, 396, 397;
M. scintillans, 372
Micariinae, 397
Micariosoma, 397
Michael, 460, 461, 462, 466 n.
Micrathena, 410
Microdiscus, 225, 231, 245
Microlyda, 486 n.
Micrommata, 414;
M. virescens, 413, 414
Microneta, 406
Microniscidae, 130
Migas, 387
Miginae, 387
Milne-Edwards, 504
Milnesium, 480, 485;
M. alpigenum, 487;
M. tardigradum, 487
Miltia, 396
Mimetidae, 411
Mimetus, 411;
M. interfector, 368
Mimicry, in Spiders, 372
Mimoscorpius, 312
Miopsalis, 448
Misumena, 412;
M. vatia, 371, 373, 412
Mites, = Acarina, q.v.
Moggridge, 354, 355 n.
Moggridgea, 387
Moina, 37, 52;
reproduction, 46, 47, 48, 49;
M. rectirostris, 46, 47, 52
Mole-crab, 170
Monochetus, 465
Monolistra (Sphaeromidae), habitat, 211
Monopsilus, 54
Monostichous eyes, 301
Monstrilla, 64
Moustrillidae, 63
Morgan, 517, 518, 521
Mortimer, Cromwell, on Trilobites, 221
Mosaic vision, 147
Moseley, 523
Moulting (Ecdysis), 154, 155, 225, 338
Mouth, of Trilobites, 234
Mud-mites, 472
Müller, F., on Tanaids, 123
Müller, O. F., on position of Tardigrada, 483
Munidopsis, 170;
eyes, 149;
M. hamata, 168
Munnopsidae, 128
Munnopsis typica, 127
Murray, 455
Murray, J., on British Tardigrada, 485
Muscular system, in Tardigrada, 481;
in Pentastomida, 490
Mygale, 337, 386 n., 389
Mygalidae, = Aviculariidae, q.v.
Myrmarachne formicaria, 421
Myrmecium, 397
Myrtale perroti, 387
Mysidacea, 118
Mysidae, 113, 114, 119;
habitat, 201;
relation to Nebalia, 112
Mysis, 120;
maxillipede, 10, 11;
resemblance to Paranaspides, 117;
M. oculata, var. relicta, 120, 210;
M. vulgaris, 118
Mysis-larva, of Lobster, 156;
of Peneus, 161
Mytilicola, 68
Nanodamon, 313
Nauplius, of Haemocera danae, 64;
of Lepas fascicularis, 81;
of Sacculina, 97;
of Euphausia, 144;
an ancestral larval form, 145;
of Peneus, 159;
compared with Protaspis, 239
Nebalia, 111, 112, 114;
segmentation, 6, 7;
limbs, 10, 11;
relation to Cumacea, 120;
compared with Trilobita, 242;
N. geoffroyi, 111
Nebo, 307
Neck-furrow, 224
Nemastoma, 443, 451;
N. chrysomelas, 452;
N. lugubre, 452
Nemastomatidae, 451
Nematocarcinus, 163
Nemesia, 388;
N. congena, 355, 357
Neolimulus, 278, 279
Neoniphargus, distribution, 216
Neopallene, 537
Nephila, 408;
N. chrysogaster, 380;
N. plumipes, 366
Nephilinae, 408
Nephrops, 154;
N. andamanica, distribution, 205;
N. norwegica, 205
Nephropsidae, 154;
resemblance to Dromiacea, 184
Neptunus, 191;
N. sayi, habitat, 202
Nereicolidae, 73
Nervous system, of Crustacea, 5;
of Branchiopoda, 30;
of Squilla, 142;
of Arachnida, 257;
of Limulus, 270;
of Scorpions, 305;
of Pedipalpi, 311;
of Spiders, 332, 333;
of Solifugae, 428;
of Pseudoscorpions, 434;
of Phalangidea, 445, 446;
of Acarina, 460;
of Tardigrada, 482;
of Pentastomida, 491;
of Pycnogons, 516
Neumann, 470
Nicodaminae, 416
Nicodamus, 416
Nicothoe astaci, 68
Nileus, 229, 249;
N. armadillo, eye, 228
Niobe, 249
Niphargoides, 138
Niphargus, 137, 138;
distribution, 216;
N. forelii, 138;
N. puteanus, habitat, 209, 210
Nogagus, 73
Nops, 315, 336, 395
Norman, A. M., 540
Notaspis, 467
Nothrus, 468
Notodelphys, 66
Notostigmata, 473
Nyctalops, 312
Nycteribia (Diptera), 526
Nymph, 463
Nymphon, 503, 536;
N. brevicaudatum, 507, 536;
N. brevicollum, 511, 521;
N. brevirostre, 503, 504, 506, 508, 509, 541, 542;
N. elegans, 506, 542;
N. femoratum, 541;
N. gallicum, 541;
N. gracile, 511, 541, 542;
N. gracilipes, 542;
N. grossipes, 541;
N. hamatum, 512;
N. hirtipes, 542;
N. horridum, 537;
N. johnstoni, 541;
N. leptocheles, 542;
N. longitarse, 541, 542;
N. macronyx, 542;
N. macrum, 542;
N. minutum, 541;
N. mixtum, 541;
N. pellucidum, 541;
N. rubrum, 541, 542;
N. serratum, 542;
N. simile, 541;
N. sluiteri, 542;
N. spinosum, 541;
N. stenocheir, 542;
N. strömii, 509, 541
Nymphonidae, 536
Nymphopsinae, 535 n.
Nymphopsis, 534, 535 n.;
N. korotnevi, 534;
N. muscosus, 534
Obisiinae, 436, 437

Obisium, 436, 438
Ochyrocera, 393
Octomeridae, 91
Octomeris, 91
Ocyale mirabilis, 416
Ocypoda, 194, 196;
habitat, 198;
distribution, 201
Ocypodidae, 196
Oecobiidae, 386 n., 392
Oecobius, 392;
Oe. maculatus, 392
Oehlert, on facial suture of Trinucleus, 226
Ogovia, 448
Ogygia, 249
Oiceobathes, 535
Oithona, 61;
O. nana, 203;
O. plumifera, 203
Olenelloides, 247;
O. armatus, 247
Olenellus, 225, 227, 232, 236, 247
Olenidae, 247
Olenus, 232, 247;
O. truncatus, 248
Oligolophus, 450;
O. agrestis, 450;
O. spinosus, 441, 450, 451
Olpium, 436, 437;
O. pallipes, 437
Ommatoids, 310, 311, 312
Oncaea, 69;
O. conifera, phosphorescence, 60
Oncaeidae, 69
Oniscoida, 128
Oniscus, 129
Ononis hispanica, Spiders on, 419
Onychium, 324
Oomerus stigmatophorus, 539
Oonopidae, 336, 393
Oonops, 394;
O. pulcher, 366, 394
Oorhynchus, 507, 535;
O. aucklandiae, 535
Oostegites, of Malacostraca, 114
Operculata, 89, 91
Ophiocamptus (Moraria), 62;
O. brevipes, 62
Opilioacarus, 454, 473;
O. arabicus, 473;
O. italicus, 473;

Macroeconomics 20th Edition Mcconnell Test Bank Full Chapter PDF

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Macroeconomics 20th Edition

McConnell Test Bank

A. Short-Answer, Essays, and Problems

2. Define the consumption schedule.

3. Describe the saving schedule.

5. Fill in the table below. Describe your result.

13. Complete the accompanying table.

14. Complete the accompanying table.

25. Use the graphs below to answer the following questions:

27. Describe the relationship shown by the investment demand curve.

28. Consider the following investment situations.

29. Use the following data to answer the questions.

(a) Explain why this table is essentially an investment demand schedule.

30. What is the investment demand curve?

41. Explain the economic impact of an increase in the multiplier.

42. Consider the effect of the following on the multiplier.

47. How large is the actual multiplier?

B. Answers to Short-Answer, Essays, and Problems

2. Describe the consumption schedule.

3. Describe the saving schedule.

5. Fill in the table below. Describe your result.

Disposable Income Consumption Saving

[text: E pp. 616-618; MA pp. 220-222]

[text: E pp. 616-618; MA pp. 220-222]

13. Complete the accompanying table.

14. Complete the accompanying table.

(a) See graphs.

[text: E p. 622; MA p. 222]

25. Use the graphs below to answer the following questions:

27. Describe the relationship shown by the investment demand curve.

28. Consider the following investment situations.

29. Use the following data to answer the questions.

(a) Explain why this table is essentially an investment demand schedule.

30. What is the investment demand curve?

(a) A new type of engine is developed that is more fuel efficient.

41. Explain the economic impact of an increase in the multiplier.

42. Consider the effect of the following on the multiplier.

47. How large is the actual multiplier?

Obisiinae, 436, 437

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