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Chapter 8—The Keynesian Model
MULTIPLE CHOICE
1. Classical economists believed that:

a. price flexibility automatically directs market economies to full employment.
b. budget deficits and surpluses were necessary for the control of economic fluctuations.
c. market economies suffer prolonged periods of recessions and depressions.
d. market economies are inherently unstable because of fluctuating aggregate demand.
ANS: A PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic
TOP: Introducing Classical Theory and the Keynesian Revolution
KEY: Bloom’s: Comprehension
2. According to Say's law, there cannot be overproduction of goods and services because:
a. planned aggregate expenditures sometimes fall short of total output.
b. prices and wages are "sticky" or inflexible in the downward direction.
c. demand creates its own supply.
d. supply creates its own demand.
ANS: D PTS: 1 DIF: Easy NAT: BUSPROG: Analytic
3. Prior to the Great Depression, classical economists believed that a recessionary downturn would be
reversed by:
a. higher wages and prices.
b. lower wages and prices.
c. an expansionary monetary policy on the part of the Federal Reserve System.
d. an increase in government spending that would stimulate aggregate demand.
ANS: B PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic
4. The popular theory prior to the Great Depression that the economy will automatically adjust to achieve
full employment in the long run is:
a. supply-side economics. c. classical economics.
b. Keynesian economics. d. mercantilism
ANS: C PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic
KEY: Bloom’s: Knowledge
5. The French economist Jean-Baptiste Say transformed the equality of total output and total spending
into a law that can be expressed as follows:
a. Unemployment is not possible in the short run.
b. Demand and supply are never equal.
c. Supply creates its own demand.
d. Demand creates its own supply.
6. Classical economic theory predicted that in the long run the economy would experience:
a. below full unemployment. c. full employment.
b. rising rate of inflation. d. idle factors of production.
ANS: C PTS: 1 DIF: Easy NAT: BUSPROG: Analytic
7. According to the classical economists, which of the following would make prolonged unemployment
impossible?
a. Flexible prices, wages, and interest rates. c. Stable investment demand.
b. Activist government policies. d. A steadily growing money supply.
ANS: A PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic
8. The classical economists argued that the production of goods and services (supply) generates an equal
amount of total income and, in turn, total spending. This theory is called:
a. Keynes' General Theory. c. the "animal spirits" theory.
b. Say's Law. d. the law of autonomous consumption.
ANS: B PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic
9. Which of the following statements is true about Say's law?

a. It states that supply creates its own demand.
b. It states that demand creates its own supply.
c. It states that total output will always exceed total spending.
d. It states that consumption spending is the most volatile component of aggregate
expenditures.
e. It is a major proposition of the Keynesian model.
10. The dominant school of economic thought until midway through the Great Depression of the 1930s
was:
a. classical.
b. Keynesian.
c. monetarism.
d. supply-side.
e. rational expectations.
11. If the economy were left on its own without the interference of government or the Fed, it would move
toward an equilibrium rate of growth that would produce, with only minor interruptions, full
employment without inflation. What school supports this view?
a. Classical.
b. Keynesian.
c. Monetarism.
d. Supply-side.
e. Neo-Keynesian.
12. The hands-off view of the classical school rests on which of the following two simple propositions
about markets?
a. Demand creates its own supply and markets are basically competitive.
b. Industrial policy is inevitable and all prices are flexible.
c. Market failure occurs and prices are rigid.
d. Wages are sticky downward and market failure is inevitable.
e. Markets are basically competitive and prices are flexible.
ANS: E PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic
13. In the view of the classical school, unemployment:

a. is a permanent condition.
b. disappears when everyone who is willing to work at the equilibrium wage finds
employment.
c. exists because people do not interfere with the competitive process.
d. is only temporary because all wages and prices are rigid.
e. is necessary and good for the economy.
14. The most appropriate countercyclical policy, or stabilization policy, in times of unemployment,
according to classical economists, is for the government to:
a. increase the minimum wage.
b. impose wage and price controls.
c. stimulate aggregate demand.
d. cut taxes.
e. do nothing.
15. The school of thought that emphasizes the natural tendency for an economy to move toward
equilibrium full employment is known as the:
a. Keynesian school. c. rational expectations school.
b. supply-side school. d. classical school.
16. The dominant school of thought prior to the 1930s was known as the:
a. Keynesian school.
b. classical school.
c. rational expectations school.
d. supply-side school.
e. monetarist school.
ANS: B PTS: 1 DIF: Easy NAT: BUSPROG: Analytic
17. Keynes once remarked that, in the long run, we're all dead. He was responding to the conventional
wisdom of classical economics who argued that:
a. the supply curve should remain vertical in the long run.
b. World War I was fought to free Britain from economic ruin.
c. depression was only a short-run, temporary departure from full-employment equilibrium.
d. funeral plots need to be determined by the market.
e. market-based realities cause the estate tax to be too high.
ANS: C PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic
KEY: Bloom’s: Analysis
18. The Keynesian view stresses that:

a. demand creates its own demand.
b. there is direct relationship between consumer spending and disposable income.
c. when aggregate expenditures (demand) can be forever less than full-employment output
therefore prolonged unemployment will persist.
d. all of these are true.
ANS: D PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic
19. According to the Keynesian view, the prolonged unemployment of the Great Depression:
a. was surprising because Keynesians believed that wage rates would decline and direct the
economy to full employment.
b. was surprising because Keynesians believed that lower interest rates would direct the
economy to full employment.
c. resulted because the total expenditures on goods and services were less than the
full-employment rate of output.
d. resulted because the federal government ran large budget deficits during the 1930s.
20. John Maynard Keynes and his followers argued that the Great Depression was primarily the result of:
a. excessive government spending.
b. large budget deficits.
c. the perverse monetary policies of the Fed.
d. insufficient aggregate spending on goods and services.
ANS: D PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic
21. The Keynesian model of macro equilibrium provided an explanation for the:
a. high rates of both unemployment and inflation experienced during the 2110s.
b. prolonged high rates of unemployment experienced during the 1930s.
c. low interest rates of the 1950s and 1960s.
d. budget surpluses and rapid growth of the U.S. economy during the 1990s.
22. What is the title of the John Maynard Keynes's book published in 1936 that challenged the classical
self-correction economic theory?
a. In the Long-run We Are Dead.
b. Classical Economics Revised.
c. General Theory of Employment, Interest, and Money.
d. A Keynesian Approach to Economic Policy.
23. According to John Maynard Keynes:

a. aggregate expenditures (demand) can be forever inadequate to achieve full employment.
b. aggregate output (supply) can be forever inadequate to achieve full employment.
c. the economy would automatically adjust to full employment in the long run.
d. neither aggregate demand nor aggregate supply is a determinant of full-employment real
GDP.
24. Keynesian economics:

a. affirms the classical economists' basic premise concerning competitive markets.
b. believes that monopolies and unions tend to be permanent fixtures in our economy and the
prices they create tend to be flexible, at least downwardly.
c. emphasizes the possibility that an economy can never be in equilibrium at less than full
employment.
d. prefers to emphasize aggregate supply over aggregate demand.
e. believes that unemployment results when aggregate demand is insufficient to reach a
full-employment level of real GDP.
ANS: E PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic
25. Keynesians:
a. accept the countercyclical policy of doing nothing, that is, allowing market forces to work.
b. believe that the level of aggregate demand in the 1930s was sufficient to generate full
employment.
c. accept the fact that policymakers should eliminate inflation first before focusing on
unemployment.
d. focus on increasing aggregate demand in order to stimulate the economy.
e. were prepared for the events that beset our economy in the 1970s and 1980s.
26. A primary emphasis of the Keynesian school is the economy:

a. has a tendency to always create a full-employment level of output.
b. has a tendency to always create inflationary pressure at all levels of output.
c. has a tendency to eliminate unemployment by lowering wage rates to create an
equilibrium in the labor market.
d. is driven by the supply-side of the market.
e. has a tendency to be in equilibrium at less than full employment.
27. If the economy is experiencing less than full-employment, the Keynesian school recommends that the
government:
a. do nothing to stimulate the economy.
b. undertake fiscal policy to stimulate aggregate demand.
c. undertake fiscal policy to stimulate aggregate supply.
d. balance the budget to stimulate aggregate demand.
28. The consumption function shows the relationship between:

a. planned consumption expenditures and disposable income.
b. permanent income and savings.
c. business inventory and real GDP.
d. aggregate demand and aggregate consumption.
29. In the basic Keynesian model, the major determinant of consumption expenditures is:
a. the interest rate. c. investment.
b. inflation. d. disposable income.
30. The consumption function has a slope less than one because:
a. as disposable income increases, the real rate of interest will decline.
b. saving and consumption are equal at all levels of income.
c. as disposable income increases, consumption expenditures increase by an amount less than
the increase in income.
d. as disposable income increases, consumption expenditures increase by an amount greater
than the increase in income.
31. In the Keynesian aggregate consumption-income graph, the vertical distance between the consumption
function and the 45-degree line shows the:
a. amount of savings (or dissavings) at that level of disposable income.
b. amount of disposable income at that level of consumption.
c. increase in planned business investment at each level of inflation.
d. increase in income that causes each change in real GDP.
32. At the point where the consumption function crosses the 45-degree line:
a. consumption is equal to disposable income, and therefore, saving is zero.
b. consumption is less than income, and saving is present.
c. consumption is greater than income, and dissaving is present.
d. planned saving equals actual saving minus disposable income.
33. In the Keynesian aggregate expenditure model, the 45-degree line indicates:
a. amounts households plan to spend at each possible level of income.
b. amounts households plan to save at each possible level of income.
c. all income levels at which the planned spending of decision makers equals total output.
d. all income levels at which the marginal propensity to consume is one.
34. According to Keynes, what is the most important determinant of households' spending on goods and
services?
a. The price level. c. Autonomous consumption.
b. The interest rate. d. Disposable income.
35. The consumption function shows the relationship between consumer expenditures and:
a. the interest rate. c. savings.
b. the tax rate. d. disposable income.
36. The value of consumption at each level of disposable personal income, all other determinants of
consumption unchanged, is shown by the:
a. aggregate dissaving curve. c. investment schedule.
b. consumption function. d. savings function.
37. The consumption function expresses the:

a. relation between consumption and dissaving.
b. relation between consumption and disposable personal income.
c. purposes of consumption.
d. relation between consumption and dissaving.
38. A movement along the consumption function is caused by a change in:

a. consumption. c. aggregate supply.
b. expectations. d. disposable income.
39. Consider the Keynesian consumption function. If disposable income is greater than the break-even
level of disposable income, then households will be:
a. investing. c. dissaving.
b. borrowing. d. saving.
40. A movement along the consumption function is caused by a change in:

a. the price level. c. real disposable income.
b. autonomous consumption. d. the stock of durable goods.
41. Which of the following events would produce an upward shift in the consumption function, other
things being equal?
a. An increase in consumer wealth. c. A decrease in autonomous consumption.
b. A decrease in consumer wealth. d. Both b and c.
42. The relationship between consumer expenditures and disposable income is the:
a. savings function. c. disposable income function.
b. the tax rate function. d. consumption function.
43. Which of the following statements is true concerning the consumption function?
a. It slopes upward.
b. Its slope equals the MPC.
c. It represents the direct (positive) relationship between consumption spending and the level
of real disposable income.
d. If the consumption function lies above the 45-degree line then saving is positive.
e. All of these.
44. Which of the following will shift the consumption function upward?
a. An increase in consumer wealth.
b. An increase in the interest rate.
c. An increase in personal income taxes.
d. A decrease in the MPC.
e. An increase in disposable income.
45. A movement along in the consumption function is caused by a change in:

a. real disposable income.
b. can be caused by a change in the price level.
c. the marginal propensity to consume (MPC).
d. none of these.
46. Economists refer to the simple relationship between consumption and disposable income as:
a. autonomous consumption.
b. the marginal propensity to consume.
c. the absolute disposable income hypothesis.
d. disposable income.
e. the consumption function.
ANS: E PTS: 1 DIF: Easy NAT: BUSPROG: Analytic
47. The consumption function will shift upward if real asset and money holdings:
a. increase, if people expect prices to increase, if interest rates decrease, and if taxes
decrease.
b. increase, if people expect prices to increase, if interest rates increase, and if taxes increase.
c. increase, if people expect prices to increase, if interest rates increase, and if taxes decrease.
d. decrease, if people expect prices to decrease, if interest rates decrease, and if taxes
decrease.
e. decrease, if people expect prices to increase, if interest rates increase, and if taxes
decrease.
48. The consumption function shows the relationship between consumption and:
a. interest rates. c. price level changes.
b. saving. d. disposable income.
49. The relationship between consumption and disposable income is the:

a. spending function.
b. consumption function.
c. autonomous consumption.
d. household consumer spending
e. household spending function.
50. If people expect prices to fall in the future,

a. their consumption function in the present will shift downward.
b. their consumption function in the present will shift upward.
c. their consumption function in the present will be unchanged.
d. they will increase their current levels of consumption by moving up along their
consumption functions.
e. they will decrease their current levels of consumption by moving down along their
consumption functions.
51. The consumption function will shift for all of the following reasons except:
a. a change in a household's real assets.
b. a change in interest rates.
c. expectations of price changes.
d. changes in a household's disposable incomes.
e. changes in taxation policy.
52. A movement along a consumption function is caused by:

a. a change in households' real assets.
b. a change in interest rates.
c. changes in taxation policy.
d. expectations of price changes.
e. changes in households' disposable incomes.
53. In the consumption function, consumption is caused by changes in the:
a. price level.
b. level of disposable income.
c. interest rate.
d. level of investment.
e. level of real assets.
54. Which one of the following will shift the consumption function upward?
a. Higher interest rates.
b. Expectations that the economy will grow in the future.
c. A decrease in money holdings.
d. Higher capacity utilization rates.
e. A tax increase.
55. \If the interest rate increases, then the:

a. economy will move to a new point along the existing consumption function.
b. consumption function will shift up.
c. consumption function will shift down.
d. investment demand curve will shift up.
e. economy will move to a new point along the existing investment demand curve.
56. If people's real assets increase, then the:

a. economy will move to the right along the existing consumption function.
b. economy will move to the left along the existing consumption function.
c. consumption function will shift down.
d. consumption function will shift up.
e. investment demand curve will shift up.
57. Which one of the following will shift the consumption function upward?
b. An increase in real assets.
c. Expectations of future economic growth.
d. Lower capacity utilization rates.
e. A tax increase.
58. Which one of the following will shift the consumption function downward?
a. An increase in disposable income.
b. A decrease in disposable income.
c. Legislation making credit harder to obtain.
d. Lower tax rates.
e. A technological breakthrough.
59. Given the consumption function C = $500 billion + 0.80Y, an increase in disposable income from
$6,000 billion to $7,000 billion will cause consumption to increase by:
a. $800 billion.
b. $1,000 billion.
c. $1,300 billion.
d. $1,500 billion.
e. $1,800 billion.
KEY: Bloom’s: Application
60. Which one of the following changes is consistent with a change in an economy's consumption function
from C = $500 billion + 0.80Y to C = $700 billion + 0.80Y?
a. An increase in disposable income taxes.
b. An increase in interest rates
c. A decrease in permanent disposable income.
d. An increase in wealth.
e. An increase in savings.
61. At the point where the disposable income line intersects the consumption function, saving:
a. equals consumption. c. is less than zero.
b. equals disposable income. d. is equal to zero.
62. Which of the following will shift the consumption function upward?
a. A tax increase.
b. Higher capacity utilization rates.
c. Higher disposable income.
d. Lower wealth holdings.
e. Expectations of inflation.
63. If consumption spending is larger than disposable income,
a. saving is positive.
b. dissaving occurs.
c. saving is exactly zero.
d. a depression results.
e. this cannot occur.
64. When economists say that private investment is "autonomous," they mean that it:
a. will never change.
b. is not dependent on the current level of disposable income.
c. is determined by the "animal spirits" of business decision makers.
d. is determined by the level of saving.
65. Consumption spending that is independent of the level of disposable income is known as:
a. marginal consumption.
b. transitory consumption.
c. permanent consumption.
d. relative consumption.
e. autonomous consumption.
66. Autonomous consumption is consumption that:

a. varies directly with disposable income.
b. varies inversely with disposable income.
c. is independent of the level of disposable income.
d. is constant at first and then varies with disposable income.
67. For any given consumption function, autonomous consumption is equal to the level of consumption
associated with:
a. negative disposable income. c. zero disposable income.
b. positive disposable income. d. unstable disposable income.
68. The vertical intercept of the consumption function that represents the portion of consumption
expenditure not associated with a level of disposable income is known as:
a. zero income intercept. c. autonomous consumption.
b. disposable income intercept. d. automatic consumption line.
69. Autonomous consumption is equal to the level of consumption associated with:

a. unstable disposable income. c. zero disposable income.
b. positive disposable income. d. negative disposable income.
70. Autonomous consumption spending is consumption spending:

a. that is dependent on changes in disposable income.
b. on durable goods.
c. that causes the MPC to rise.
d. that is independent of the level of disposable income.
e. that causes the MPC to fall.
71. Given the consumption function C = $100 billion + 0.75 ($300 billion), autonomous consumption is
equal to:
a. $100 billion.
b. $225 billion.
c. $300 billion.
d. $325 billion.
e. $400 billion.
ANS: A PTS: 1 DIF: Easy NAT: BUSPROG: Analytic
72. That part of disposable income not spent on consumption is defined as:
a. transitory disposable income.
b. permanent disposable income.
c. disposable income.
d. autonomous consumption.
e. saving.
73. If disposable income is $400 billion, consumption spending is $380 billion, and MPC is 0.5, what is
the level of saving?
a. $20 billion.
b. $210 billion.
c. $380 billion.
d. $590 billion.
e. $780 billion.
74. If disposable income is $400 billion, autonomous consumption is $60 billion, and MPC is 0.8, what is
the level of saving?
a. $20 billion.
b. $210 billion.
c. $380 billion.
d. $590 billion.
e. $780 billion.
75. That part of disposable income not spent on consumption is:

a. saved. c. wasted.
b. invested. d. borrowed.
76. If, for a given disposable income level, the disposable income line lies above the consumption curve,
saving:
a. equals consumption.
b. equals disposable income.
c. is less than zero.
d. is equal to zero.
e. is greater than zero.
77. If, for a given disposable income level, the disposable income line lies below the consumption curve,
saving:
a. equals consumption.
b. equals disposable income.
c. is less than zero.
d. is equal to zero.
e. is greater than zero.
78. If Y = $500 billion, autonomous consumption = $400 billion, and the marginal propensity to save =
0.20, then saving will equal:
a. −$300 billion.
b. $300 billion.
c. $0.
d. $80 billion.
e. −$80 billion.
79. If Y = $500 billion, autonomous consumption = $300 billion, and the marginal propensity to save =
0.20, then saving will equal:
a. −$200 billion.
b. $200 billion.
c. −$100 billion.
d. $100 billion.
e. $40 billion.
80. If income increases from $110,000 to $120,000 and consumption from $108,000 to $114,000, the
marginal propensity to consume is:
a. 0.40. c. 0.94.
b. 0.60. d. 1.60.
81. Use the table below to answer the following question.
Income Consumption
(Dollars) (Dollars)
60,000 58,000
66,000 62,000
What is the marginal propensity to consume?

a. 0.33. c. 0.96.
b. 0.67. d. 1.5.
82. Use the table below to answer the following question.
Income Consumption
(Dollars) (Dollars)
45,000 40,000
50,000 44,000
What is the marginal propensity to consume?

a. 0.80. c. 0.89.
b. 0.88. d. 1.25.
83. The marginal propensity to consume is defined as the:
a. fraction of total income not spent on consumption.
b. proportion of any change in income that is spent on consumption.
c. fraction of total income spent on consumption.
d. fraction of a change in income that is saved.
84. Mathematically, the marginal propensity to consume is:

a. consumption divided by income.
b. the change in consumption divided by the change in income.
c. income divided by consumption.
d. the change in income divided by the change in consumption.
85. John Maynard Keynes's central proposition that a dollar increase in disposable income would increase
consumption, but by less than the increase in disposable income, means the marginal propensity to
consume (MPC) is:
a. greater than or equal to one. c. less than one, but greater than zero.
b. equal to one. d. negative.
86. The fraction of each added dollar of disposable income that is used for consumption is called the:
a. average propensity to consumer (APC). c. marginal consumption propensity (MCP).
b. autonomous consumption rate (ACR). d. marginal propensity to consume (MPC).
87. The marginal propensity to consume (MPC) is computed as the change in:
a. consumption divided by the change in savings.
b. consumption divided by the change in disposable personal income.
c. consumption divided by the change in GDP.
d. None of these.
88. If your disposable income increases from $30,000 to $35,000 and your consumption increases from
$11,000 to $12,000, your marginal propensity to consume (MPC) is:
a. 0.2.
b. 0.4.
c. 0.5.
d. 0.8.
e. 1.0.
89. If your disposable personal income increases from $33,000 to $41,000 and your consumption increases
from $8,000 to $12,000, your marginal propensity to consume (MPC) is:
a. 0.2.
b. 0.4.
c. 0.5.
d. 0.8.
e. 1.0.
90. The marginal propensity to consume (MPC) is the slope of the:

a. GDP curve. c. consumption function.
b. disposable income curve. d. autonomous consumption curve.
91. The slope of the consumption function is called the:

a. autonomous consumption rate. c. average propensity to consume.
b. marginal consumption rate. d. marginal propensity to consume.
92. The marginal propensity to consume (MPC) is computed as the change in consumption divided by the
change in:
a. GDP. c. saving.
b. disposable personal income. d. none of these.
93. If your disposable personal income increases from $40,000 to $48,000 and your consumption increases
from $35,000 to $39,000, your marginal propensity to consume (MPC) is:
a. 0.20.
b. 0.40.
c. 0.50.
d. 0.80.
e. 1.00.
94. The change in consumption divided by a change in disposable income is defined as:
a. the marginal propensity to consume.
b. autonomous consumption.
c. the consumption function.
d. Keynes' absolute disposable income hypothesis.
e. transitory consumption.
95. The nation has its own MPC. When disposable income increases from $300 billion to $400 billion,
national consumption increases from $300 billion to $360 billion. At Y = $400 billion, the MPC is:
a. 0.2.
b. 0.5.
c. 0.6.
d. 0.67.
e. 1.33.
96. The marginal propensity to consume is:

a. the change in disposable income divided by the change in consumption.
b. consumption spending divided by disposable income.
c. disposable income divided by consumption spending.
d. the change in consumption divided by the change in disposable income.
e. the change in consumption divided by disposable income.
97. The change in consumption divided by a change in disposable income is called the:
a. consumption function.
b. marginal propensity to consume.
c. marginal propensity to spend.
d. spending function.
e. changing propensity to consume.
98. The ratio of a change in consumption to a change in disposable income is the:

a. consumption function.
b. propensity to consume.
c. average propensity to consume.
d. extra propensity to consume.
e. marginal propensity to consume.
99. The marginal propensity to consume measures the ratio of the:

a. average amount of our disposable income that we spend.
b. average amount of our savings that we spend.
c. change in consumer spending to a change in money holdings.
d. change in consumer spending to a change in interest rates.
e. change in consumer spending to a change in disposable income.
Exhibit 8-1 Disposable income and consumption data
Disposable Income Change in Consumption

(Y) Disposable Income (C)
0 500
1,000 1,000 1,400
2,000 1,000 2,200
3,000 1,000 2,900
4,000 1,000 3,500
5,000 1,000 4,000
100. In Exhibit 8-1, when disposable income (Y) is increased from $1,000 to $2,000, the marginal
propensity to consume is:
a. 0.2.
b. 0.6.
c. 0.8.
d. 1.0.
e. 1.25.
101. In Exhibit 8-1, when disposable income is increased from $2,000 to $3,000 to $4,000,
a. total consumption increases by $1,000.
b. the marginal propensity to consume remains constant.
c. the marginal propensity to consume increases from 0.6 to 0.7.
d. the marginal propensity to consume decreases from 0.8 to 0.7.
e. the marginal propensity to consume decreases from 0.7 to 0.6.
102. In Exhibit 8-1, when disposable income (Y) is increased from $0 to $1,000 to $2,000, the marginal
propensity to consume:
a. is 1.
b. decreases from 0.9 to 0.8.
c. decreases from 0.8 to 0.7.
d. increases from 0.8 to 0.9.
e. is negative.
103. The marginal propensity to save (MPS) is computed as the change in:
a. savings divided by the change in saving.
b. savings divided by the change in disposable personal income.
c. saving divided by the change in GDP.
d. None of these.
104. If your disposable personal income increases from $30,000 to $40,000 and your savings increases
from $2,000 to $4,000, your marginal propensity to save (MPS) is:
a. 0.2.
b. 0.4.
c. 0.5.
d. 0.8.
e. 1.0.
105. The sum of the marginal propensity to consume (MPC) and the marginal propensity to save (MPS)
always equals:
a. 1. c. the interest rate.
b. 0. d. the marginal propensity to invest (MPI).
106. The marginal propensity to save is:

a. the change in saving induced by a change in consumption.
b. (change in S) / (change in Y).
c. 1 − MPC / MPC.
d. (change in Y − bY) / (change in Y).
e. 1 − MPC.
107. The change in saving divided by the change in disposable income is the:
a. propensity to save.
b. saving function.
c. average propensity to save.
d. extra propensity to save.
e. marginal propensity to save.
108. The marginal propensity to save is:

a. the change in saving divided by the change in disposable income.
b. the change in disposable income divided by the change in saving.
c. saving divided by disposable income.
d. disposable income divided by saving.
e. saving divided by consumption.
109. The relationship between MPC and MPS is:

a. 1 + MPC = MPS. c. 1 + MPS = MPC.
b. 1 − MPC = MPS. d. MPC − MPS = 1.
110. If the marginal propensity to consume = 0.75, then:

a. the marginal propensity to save = 0.75.
b. the marginal propensity to save = 1.33.
c. the marginal propensity to save = 0.20.
d. the marginal propensity to save = 0.25.
e. since the marginal propensity to save and the marginal propensity to consume are
unrelated, we cannot determine the marginal propensity to save from the information
given.
Exhibit 8-2 Consumption function
111. As shown in Exhibit 8-2, autonomous consumption is:

a. 0.
b. $2 trillion.
c. $4 trillion.
d. $6 trillion.
e. $8 trillion.
112. As shown in Exhibit 8-2, saving occurs:

a. at 0 disposable income.
b. between $0 and $4 trillion disposable income.
c. at $4 trillion disposable income.
d. at a disposable income greater than $4 trillion.
113. As shown in Exhibit 8-2, the marginal propensity to consume (MPC) is:
a. 0.25. c. 0.75.
b. 0.50. d. 0.90.
114. As shown in Exhibit 8-2, the marginal propensity to save (MPS) is:
a. 0.25. c. 0.75.
b. 0.50. d. 0.90.
Disposable Marginal propensity to Marginal propensity to

income Consumption Saving consume (MPC) save (MPS)
0 $100
100 175
200 250
300 325
400 400
500 475
600 550
Note: All amounts are in billions of dollars per year.

a. $75 billion. c. $175 billion.
b. $100 billion. d. $275 billion.
116. As shown in Exhibit 8-3, if disposable income is $100 billion, saving is:
a. $100 billion. c. −$75 billion.
b. $75 billion. d. −$175 billion.
117. As shown in Exhibit 8-3, if disposable income is $600, saving is:

a. zero.
b. −$100 billion.
c. $100 billion.
d. −$50 billion.
e. $50 billion.
118. As shown in Exhibit 8-3, if disposable income is $100 billion, the marginal propensity to consume
(MPC) is:
a. 0.00. c. 0.75.
b. 0.25. d. 1.00.
119. As shown in Exhibit 8-3, if disposable income is $400 billion, the marginal propensity to consume
(MPC) is:
a. 0.00. c. 0.75.
b. 0.25. d. 1.00.
120. As shown in Exhibit 8-3, if disposable income is $100 billion, the marginal propensity to save (MPS)
is:
a. 0.00. c. 0.75.
b. 0.25. d. 1.00.
121. As shown in Exhibit 8-3, if disposable income is $500 billion, the marginal propensity to save (MPS)
is:
a. 0.00. c. 0.75.
b. 0.25. d. 1.00.

a. 0.
b. $1 trillion.
c. $2 trillion.
d. $3 trillion.
e. $4 trillion.
123. As shown in Exhibit 8-4, dissaving occurs:


a. 0.25. c. 0.75.
b. 0.50. d. 0.90.
a. 0.25. c. 0.75.
b. 0.50. d. 0.90.
127. 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 these.
TOP: Reasons the Consumption Function Shifts KEY: Bloom’s: Comprehension
128. A downward shift in the consumption function can be caused by:

a. expectations of higher inflation. c. a lower price level.
b. an increase in wealth. d. none of these.
129. Which of the following events would produce an upward shift in the consumption function, other
things being equal?
a. An increase in consumer wealth. c. A decrease in autonomous consumption.
b. A decrease in consumer wealth. d. None of these.
130. An increase in the wealth of households, other things remaining the same, can result in ____ the
consumption function.
a. no effect on c. a movement to the left along
b. an upward shift in d. a downward shift of
131. A shift in the consumption function:

a. is based on the marginal propensity to consume.
b. can be caused by a change in the price level.
c. can be caused by a change in GDP.
d. None of these.
132. Which of the following would shift the investment demand curve rightward?
a. Firms are operating their plants at less than full capacity.
b. A decrease in the interest rate.
c. A decrease in business taxes.
d. All of the above.
e. None of the above.
133. An increase in the price level, other things remaining the same, may be expected to result in ____ the
a. a downward shift of c. an upward shift in
b. a movement along d. no effect on
134. The investment demand curve shows the amount businesses spend for investment goods at different
possible:
a. price levels. c. rates of interest.
b. levels of GDP. d. levels of taxation.
TOP: Investment Expenditures KEY: Bloom’s: Comprehension
135. Real investment spending is ____ real personal consumption.

a. equal to c. stable compared to
b. greater than d. highly volatile compared to
136. Which of the following would cause the investment demand curve to shift?
a. Animal spirits (expectations). c. Change in business taxes.
b. Technological change. d. All of these.
137. Which of the following would shift the investment demand curve leftward?
a. An increase in business taxes.
b. A decrease in business taxes.
c. A tax credit for new investment.
d. Firms are operating their plants at full capacity.
138. Which of the following would shift the investment demand curve rightward?
a. A decrease in business taxes.
b. A tax credit for new investment.
c. Firms move from unused capacity to full capacity.
d. All of these.
139. In the short-run Keynesian model, investment is:

a. autonomous in relation to the interest rate.
b. upward sloping in relation to the price level.
c. downward sloping in relation to disposable income.
d. autonomous in relation to real GDP.
140. If the interest rate rises, then firms' investment spending:

a. falls. c. remains unchanged
b. also rises. d. reacts unpredictably.
141. A downward movement along the investment demand curve would be caused by a(n):
a. increase in the expected rate of return on investment caused by an increase in business
confidence.
b. decrease in the expected rate of return on investment caused by a decrease in business
confidence.
c. increase in the rate of interest.
d. decrease in the rate of interest.
TOP: Investment Expenditures KEY: Bloom’s: Analysis
142. The investment demand curve as a function of various possible interest rates for the entire economy is
assumed to be:
a. positively sloped. c. rising, then falling.
b. negatively sloped. d. falling, then rising.
143. An increase in the rate of interest, other things being equal, will cause a(n):
a. downward shift in the investment demand curve.
b. movement downward along the investment demand curve.
c. movement upward along the investment demand curve.
d. upward shift in the investment demand curve.
144. A decrease in the rate of interest, other things being equal, will cause a:
a. rightward shift of the investment demand curve.
b. movement upward along the investment demand curve.
c. movement downward along the investment demand curve.
d. leftward shift of the investment demand curve.
145. A rightward shift of the investment demand curve would be caused by a(n):
a. increase in the expected rate of return on investment caused by an increase in business
confidence.
b. decrease in the expected rate of return on investment caused by a decrease in business
confidence.
c. increase in the rate of interest.
d. decrease in the rate of interest.
146. A rightward shift of the investment demand curve could be caused by:
a. a technological advance.
b. optimism about long-term growth.
c. forecasts of favorable business conditions.
d. an increase in confidence in short-run economic conditions.
e. any of these.
147. Which of the following would cause a rightward shift in the investment demand curve?
a. An increase in the interest rate.
b. An increase in the rate of capacity utilization.
c. An increase in households' disposable income;
d. An increase in business taxes.
148. When sketched as a function of disposable income, the investment demand curve is:
a. always horizontal. c. upward sloping.
b. always vertical. d. parabolic.
149. If Y = $100 billion, then C = $50 billion, and I = $60 billion. What will autonomous investment be
when Y = $200 billion and C = $100 billion?
a. $50 billion
b. $60 billion
c. $100 billion
d. $120 billion
e. $200 billion
150. Michelle Martelle, CEO of Michelle Enterprises, has five projects in hand and is considering which, if
any, to undertake. Their expected returns are: project A = 12 percent, project B = 7 percent, project C
= 10 percent, project D = 9 percent, and project E = 8 percent. If the interest rate is 8.5 percent, which,
if any, investment projects will she accept?
a. Only project A.
b. Projects A and C.
c. Projects A, C and D.
d. Projects A, C, D and E.
e. Projects A, B, C, D and E.
151. A lower interest rate makes more investment projects profitable, meaning that:
a. there is a direct relationship between the rate of interest and the quantity of investment
spending.
b. there is an inverse relationship between the rate of interest and the quantity of investment
spending.
c. there is no relationship between the rate of interest and the quantity of investment
spending.
d. the demand curve for investment spending is horizontal.
e. the demand curve for investment spending is vertical.
152. The demand curve for investment in the economy as a function of interest rates is:
a. vertical.
b. horizontal.
c. upward sloping.
d. downward sloping.
e. elliptical.
153. When one observes consumption and investment patterns over time, one finds that:
a. like consumption, investment is fairly stable over time.
b. like consumption, investment is fairly erratic over time.
c. unlike consumption, which is fairly stable over time, investment is subject to erratic
fluctuations.
d. unlike consumption, which is subject to erratic fluctuations, investment is fairly stable
over time.
e. investment is rarely affected by technological and economic factors.
154. If a major technological breakthrough occurs, then the:

a. investment demand curve will shift downward.
b. investment demand curve will shift upward.
c. consumption function will shift downward.
d. consumption function will shift upward.
155. If the interest rate increases, then the:

a. economy will move to a new point along the existing consumption function.
b. consumption function will shift upward.
c. investment demand curve will shift downward.
d. investment demand curve will shift upward.
156. If there are strong expectations of future economic growth, then the:
a. economy will move to the right along the existing consumption function.
b. economy will move to the left along the existing consumption function.
c. consumption function will shift downward.
d. consumption function will shift upward.
e. investment demand curve will shift upward.
157. Which one of the following will shift the investment demand curve leftward?
a. A technological breakthrough.
b. Lower tax rates.
c. Optimistic business expectations.
d. A lower rate of capacity utilization.
e. None of these.
158. Which of the following will increase investment spending?

a. More optimistic business expectations.
b. An increase in interest rates.
c. An increase in business taxes.
d. A decrease in capacity utilization.
e. All of these.
159. The aggregate expenditures function (AE) is the total spending in an economy at a given:
a. rate of interest. c. level of autonomous investment.
b. level of disposable income. d. price level.
TOP: The Aggregate Expenditures Function KEY: Bloom’s: Comprehension
160. The relationship between aggregate expenditures and disposable income is shown by the:
a. aggregate expenditures curve. c. investment curve.
b. consumption function. d. saving-disposable personal income curve.
161. The consumption function is drawn on a graph with disposable income on the horizontal axis without
including investment. Assume investment is autonomous and is added to the consumption function.
The effect is:
a. an upward adjustment in the vertical intercept.
b. no change in the adjustment in the vertical intercept.
c. an increase in the slope of the consumption schedule.
d. a decrease in the slope of the planned expenditure schedule.
TOP: The Aggregate Expenditures Function KEY: Bloom’s: Analysis
162. The sum of consumption and investment is:

a. total production. c. aggregate disposable demand.
b. aggregate supply. d. aggregate expenditures.
163. In the aggregate expenditures model, equilibrium occurs if:

a. consumption equals investment.
b. inventory equals investment.
c. aggregate expenditures equal consumption.
d. aggregate expenditures equal disposable income.
164. In the simple Keynesian Cross model, the equilibrium level of real disposable income is determined
by:
a. the real interest rate. c. aggregate expenditures.
b. prices. d. aggregate supply.
165. In the simple Keynesian aggregate expenditure model, the equilibrium level of disposable income is
achieved when:
a. the employment rate is equal to the labor force participation rate.
b. saving equals investment.
c. aggregate expenditures exceed output.
d. aggregate expenditures are equal to real disposable income.
166. Within the simple Keynesian Cross model, equilibrium takes place:
a. at full employment.
b. when aggregate spending equals real disposable income.
c. when the money interest rate and real interest rate are equal.
d. when actual and expected rates of inflation are equal.
Exhibit 8-5 Aggregate expenditures function

167. As shown in Exhibit 8-5, dissaving occurs:
a. at $5 trillion.
b. between 0 and $4 trillion.
c. where disposable income is greater than $4 trillion.
d. at $8 trillion.

a. at 0.
b. between 0 and $4 trillion.
c. where disposable income is greater than $4 trillion.
d. at $2 trillion.
a. 0.33. c. 0.67.
b. 0.50. d. 0.75.
a. 0.33. c. 0.67.
b. 0.50. d. 0.75.
a. 0.
b. $1 trillion.
c. $2 trillion.
d. $3 trillion.
e. $6 trillion.
172. As shown in Exhibit 8-5, this economy is in macro equilibrium at:

a. $2 trillion. c. $6 trillion.
b. $4 trillion. d. $8 trillion.
TOP: The Aggregate Expenditures Function KEY: Bloom’s: Analysis
a. 0.33. c. 0.67.
b. 0.50. d. 0.75.

a. 0.
b. $2 trillion.
c. $4 trillion.
d. $6 trillion.
e. $8 trillion.
175. As shown in Exhibit 8-6, this economy is in macro equilibrium at:

b. $12 trillion. d. None of these.
176. In Exhibit 8-7, what is the households' marginal propensity to consume (MPC)?
a. 0.5. c. 0.8.
b. 0.75. d. 1.
177. In Exhibit 8-7, aggregate income will equal consumption plus investment and the economy will be in
equilibrium when real disposable income is:
b. $4 trillion d. $8 trillion.

178. In Exhibit 8-8, what is the households' marginal propensity to consume (MPC)?
a. 0.5. c. 0.75.
b. 0.67. d. 0.80.
179. In Exhibit 8-8, aggregate income will equal consumption plus investment and the economy will be in
equilibrium when real disposable income is:
a. $2.33 trillion. c. $7 trillion.
b. $3 trillion. d. $10 trillion.
180. In Exhibit 8-9, consumption and real disposable income are equal at:
a. 500.
b. 100.
c. 400.
d. 200.
e. 600.
181. In Exhibit 8-9, the level of autonomous consumption for consumption function C is:
a. $100.
b. $150.
c. $50.
d. $0.
e. $200.
182. In Exhibit 8-9, the level of autonomous consumption is:

a. 0.
b. $25.
c. $50.
d. $75.
e. $100.
183. In Exhibit 8-9, when disposable income is equal to zero, saving is equal to:
a. $0.
b. $100.
c. −$50.
d. −$100.
e. $50.
184. In Exhibit 8-9, when disposable income is equal to $600, saving equals:
a. $0.
b. $100.
c. −$100.
d. $50.
e. $20.
185. In Exhibit 8-9, the value of the marginal propensity to consume is:
a. .75.
b. .80.
c. .50.
d. .25.
e. .20.
186. In Exhibit 8-9, the value of the marginal propensity to save is:
a. .50.
b. .25.
c. .20.
d. .80.
e. .75.
187. In Exhibit 8-10, the level of autonomous consumption for C' is:
a. $50.
b. $100.
c. $150.
d. $200.
e. $0.
188. In Exhibit 8-10, the value of the marginal propensity to consume is:
a. high for C' than for C. c. lower for C" than for C'.
b. lower for C" than for C. d. the same for C, C', and C".
189. In Exhibit 8-10, the shift from C to C' could be caused by a(n):
a. increase in disposable income.
b. expectation of inflation.
c. increase in interest rates.
d. increase in the level of saving.
e. decrease in household wealth.
190. In Exhibit 8-11, which of the following could cause the movement from C1 to C2?
a. Higher wealth.
b. Higher interest rates.
c. Higher taxes.
d. A technological breakthrough.
e. Expectations of future economic growth.
191. In Exhibit 8-11, which of the following could cause the movement from C1 to C2?
a. A decrease in real asset holdings.
b. Lower interest rates.
c. Expectations that the economy will grow.
d. Expectations of lower future prices.
e. Lower money holdings.
Exhibit 8-12 Investment expenditures

192. In Exhibit 8-12, which of the following could cause the shift from I1 to I2?
a. Lower money holdings.
b. Lower interest rates.
c. Expectations of a future economic slow-down.
d. Lower disposable income.
e. Lower capacity utilization.
193. In Exhibit 8-13, which of the following could cause the shift from C1 to C2?
b. An increase in disposable income.
c. A decrease in disposable income.
d. Lower tax rates.
e. Expectations of future economic growth.
194. In Exhibit 8-13, which of the following could cause the shift from C1 to C2?
a. An increase in disposable income.
b. A decrease in disposable income.
c. Legislation tightening credit availability.
d. Legislation lowering tax rates.
e. Lower capacity utilization rates.
Disposable Consumption
income (Y) (C) MPC MPS Saving
$5,000 $4,750
$6,000 $5,500
$7,000
195. In Exhibit 8-14, when disposable income is $7,000, then saving will equal:
a. $2,500.00.
b. $1,750.00.
c. $1,562.50.
d. $1,250.00.
e. $750.00.
196. In Exhibit 8-14, the MPC when Y increases from $5,000 to $6,000 is:
a. 0.20. c. 0.25.
b. 0.80. d. 0.75.
197. In Exhibit 8-14, the MPS when Y increases from $5,000 to $6,000 is:
a. 0.20. c. 0.25.
b. 0.80. d. 0.75.
TRUE/FALSE
1. Keynes argued that the economy naturally achieves full employment because supply creates its own
demand.
ANS: F PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

2. The Keynesian theory focuses on aggregate supply, while the classical theory focused on aggregate
demand.
ANS: F PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

3. The consumption function has a negative slope.

4. If autonomous consumption is greater than zero and the marginal propensity to consume is greater than
zero, but less than one, the consumption function will first be above and then below the 45 degree line.
ANS: T PTS: 1 DIF: Easy NAT: BUSPROG: Analytic

5. The consumption function has a positive slope.

6. If autonomous consumption is greater than zero and the marginal propensity to consume is greater than
zero, but less than one, the consumption function will first be below and then above the 45 degree line.

7. Real disposable income is held constant when constructing a consumption function.
ANS: F PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

8. The vertical intercept of the consumption function is used to determine the break-even level of real
disposable income.

9. In the Keynesian model, investment spending is an autonomous expenditure.
ANS: T PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

10. Saving is disposable personal income not spent on consumption.

11. Saving is disposable personal income spent on investment.

12. The marginal propensity to consume (MPC) is the change in consumption divided by the change in
disposable personal income.

13. The marginal propensity to consume (MPC) is the change in consumption divided by the change in
saving.

14. If consumption is $800 when disposable income is $1,000, the marginal propensity to consume (MPC)
must be 0.80.

15. The marginal propensity to save plus the marginal propensity to consume always equals 1.

16. If people become pessimistic about the state of the economy, the consumption function shifts
downward.

17. An increase in consumer wealth shifts the consumption function downward.

18. If people become pessimistic about the state of the economy, the consumption function shifts upward.

19. An increase in consumer wealth shifts the consumption function upward.

20. Real investment spending for the past 35 years is less volatile than real personal consumption.
ANS: F PTS: 1 DIF: Moderate NAT: BUSPROG: Analytic

21. An increase in the interest rate will stimulate firms' investment spending.

22. Real investment spending for the past 35 years is more volatile than real personal consumption.

23. A shift in the investment demand curve can be caused by a change in the expectations of profits by
businessmen.

24. If firms increase investment, the aggregate expenditures function will shift upward, other things being
equal.

ESSAY
1. Explain why the marginal propensity to save and the marginal propensity to consume sum to 1.
ANS:
When we write MPC + MPS = 1, we are stating that a change in disposable income will induce a
combination of consumption and savings changes that will equal 100 percent of that initial change in
disposable income. This is because the Keynesian model assumes that people do two things with their
disposable income, spend it or save it. What is not spent is saved.
PTS: 1 DIF: Challenging NAT: BUSPROG: Analytic

2. \What are the marginal propensity to consume (MPC) and the marginal propensity to save (MPS)?
How is the MPC related to the consumption function?
ANS:
The marginal propensity to consume is the change in consumption divided by the change in disposable
income. The marginal propensity to save is the change in saving divided by the change in disposable
income. The MPC measures the slope of the consumption function and is constant along a linear
3. Explain how changes in wealth, the price level, interest rates, and expectations alter the consumption
curve.
ANS:
An increase in wealth increases consumption at each level of disposable income (shifts the
consumption curve upward). A rise in the price level reduces the real value of assets. This reduction in
wealth reduces consumption at each level of income (shifts the consumption curve downward). An
increase in interest rates the reward for saving and discourages borrowers from securing current
spending power. An increase in interest rates, therefore, will shift the consumption curve downward. A
rise in price expectations may encourage more households to buy now to beat the expected price
increase regardless of their current disposable income (shifts the consumption curve upward).

TOP: Reasons the Consumption Function Shifts KEY: Bloom’s: Application
4. Explain how a decrease in the interest rate will affect investment.
ANS:
The interest rate is the cost of borrowing investment funds. When the interest rate decreases, then the
cost of borrowing falls, and so firms find it profitable to undertake additional investments. Therefore,
we find an inverse relationship between the interest rate and investment spending.

TOP: Reasons the Consumption Function Shifts KEY: Bloom’s: Application
5. Describe the relationship between investment and the level of disposable income.
ANS:
Investment is autonomous with respect to disposable income. That is, the level of disposable income
does not determine investment, but the level of the interest rate does. A decrease in the interest rate
increases autonomous investment and an increase in the interest rate decreases autonomous
investment.

TOP: Why Investment Demand is Unstable KEY: Bloom’s: Application
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III. Dollars
A
ll along the rails there were faces; in the
portholes there were faces. Leeward a
stale smell came from the tubby
steamer that rode at anchor listed a little to
one side with the yellow quarantine flag
drooping at the foremast.
“I’d give a million dollars,” said the old
man resting on his oars, “to know what they
come for.”
“Just for that pop,” said the young man
who sat in the stern. “Aint it the land of
opportoonity?”
“One thing I do know,” said the old man.
“When I was a boy it was wild Irish came in
the spring with the first run of shad.... Now
there aint no more shad, an them folks, Lord
knows where they come from.”
“It’s the land of opportoonity.”
A
leanfaced young man with steel eyes and a thin highbridged
nose sat back in a swivel chair with his feet on his new
mahogany-finish desk. His skin was sallow, his lips gently
pouting. He wriggled in the swivel chair watching the little scratches
his shoes were making on the veneer. Damn it I dont care. Then he
sat up suddenly making the swivel shriek and banged on his knee
with his clenched fist. “Results,” he shouted. Three months I’ve sat
rubbing my tail on this swivel chair.... What’s the use of going
through lawschool and being admitted to the bar if you cant find
anybody to practice on? He frowned at the gold lettering through the
groundglass door.
NIWDLAB EGROEG
waL-tA-yenrottA
Niwdlab, Welsh. He jumped to his feet. I’ve read that damn sign
backwards every day for three months. I’m going crazy. I’ll go out
and eat lunch.
He straightened his vest and brushed some flecks of dust off his
shoes with a handkerchief, then, contracting his face into an
expression of intense preoccupation, he hurried out of his office,
trotted down the stairs and out onto Maiden Lane. In front of the
chophouse he saw the headline on a pink extra; Japs Thrown Back
From Mukden. He bought the paper and folded it under his arm as
he went in through the swinging door. He took a table and pored
over the bill of fare. Mustn’t be extravagant now. “Waiter you can
bring me a New England boiled dinner, a slice of applepie and
coffee.” The longnosed waiter wrote the order on his slip looking at it
sideways with a careful frown.... That’s the lunch for a lawyer without
any practice. Baldwin cleared his throat and unfolded the paper....
Ought to liven up the Russian bonds a bit. Veterans Visit
President.... Another Accident on Eleventh Avenue Tracks.
Milkman seriously injured. Hello, that’d make a neat little damage
suit.
Augustus McNiel, 253 W. 4th Street, who drives a
milkwagon for the Excelsior Dairy Co. was severely injured
early this morning when a freight train backing down the New
York Central tracks ...
He ought to sue the railroad. By gum I ought to get hold of that
man and make him sue the railroad.... Not yet recovered
consciousness.... Maybe he’s dead. Then his wife can sue them all
the more.... I’ll go to the hospital this very afternoon.... Get in ahead
of any of these shysters. He took a determined bite of bread and
chewed it vigorously. Of course not; I’ll go to the house and see if
there isn’t a wife or mother or something: Forgive me Mrs. McNiel if I
intrude upon your deep affliction, but I am engaged in an
investigation at this moment.... Yes, retained by prominent
interests.... He drank up the last of the coffee and paid the bill.
Repeating 253 W. 4th Street over and over he boarded an uptown
car on Broadway. Walking west along 4th he skirted Washington
Square. The trees spread branches of brittle purple into a
dovecolored sky; the largewindowed houses opposite glowed very
pink, nonchalant, prosperous. The very place for a lawyer with a
large conservative practice to make his residence. We’ll just see
about that. He crossed Sixth Avenue and followed the street into the
dingy West Side, where there was a smell of stables and the
sidewalks were littered with scraps of garbage and crawling children.
Imagine living down here among low Irish and foreigners, the scum
of the universe. At 253 there were several unmarked bells. A woman
with gingham sleeves rolled up on sausageshaped arms stuck a
gray mophead out the window.
“Can you tell me if Augustus McNiel lives here?”
“Him that’s up there alayin in horspital. Sure he does.”
“That’s it. And has he any relatives living here?”
“An what would you be wantin wid ’em?”
“It’s a little matter of business.”
“Go up to the top floor an you’ll foind his wife there but most likely
she cant see yez.... The poor thing’s powerful wrought up about her
husband, an them only eighteen months married.”
The stairs were tracked with muddy footprints and sprinkled here
and there with the spilling of ashcans. At the top he found a
freshpainted darkgreen door and knocked.
“Who’s there?” came a girl’s voice that sent a little shiver through
him. Must be young.
“Is Mrs. McNiel in?”
“Yes,” came the lilting girl’s voice again. “What is it?”
“It’s a matter of business about Mr. McNiel’s accident.”
“About the accident is it?” The door opened in little cautious jerks.
She had a sharpcut pearlywhite nose and chin and a pile of wavy
redbrown hair that lay in little flat curls round her high narrow
forehead. Gray eyes sharp and suspicious looked him hard in the
face.
“May I speak to you a minute about Mr. McNiel’s accident? There
are certain legal points involved that I feel it my duty to make known
to you.... By the way I hope he’s better.”
“Oh yes he’s come to.”
“May I come in? It’s a little long to explain.”
“I guess you can.” Her pouting lips flattened into a wry smile. “I
guess you wont eat me.”
“No honestly I wont.” He laughed nervously in his throat.
She led the way into the darkened sitting room. “I’m not pulling up
the shades so’s you wont see the pickle everythin’s in.”
“Allow me to introduce myself, Mrs. McNiel.... George Baldwin, 88
Maiden Lane.... You see I make a specialty of cases like this.... To
put the whole matter in a nutshell.... Your husband was run down
and nearly killed through the culpable or possibly criminal negligence
of the employees of the New York Central Railroad. There is full and
ample cause for a suit against the railroad. Now I have reason to
believe that the Excelsior Dairy Company will bring suit for the losses
incurred, horse and wagon etcetera....”
“You mean you think Gus is more likely to get damages himself?”
“Exactly.”
“How much do you think he could get?”
“Why that depends on how badly hurt he is, on the attitude of the
court, and perhaps on the skill of the lawyer.... I think ten thousand
dollars is a conservative figure.”
“And you dont ask no money down?”
“The lawyer’s fee is rarely paid until the case is brought to a
successful termination.”
“An you’re a lawyer, honest? You look kinder young to be a
lawyer.”
The gray eyes flashed in his. They both laughed. He felt a warm
inexplicable flush go through him.
“I’m a lawyer all the same. I make a specialty of cases like these.
Why only last Tuesday I got six thousand dollars for a client who was
kicked by a relay horse riding on the loop.... Just at this moment as
you may know there is considerable agitation for revoking altogether
the franchise of the Eleventh Avenue tracks.... I think this is a most
favorable moment.”
“Say do you always talk like that, or is it just business?”
He threw back his head and laughed.
“Poor old Gus, I always said he had a streak of luck in him.”
The wail of a child crept thinly through the partition into the room.
“What’s that?”
“It’s only the baby.... The little wretch dont do nothin but squall.”
“So you’ve got children Mrs. McNiel?” The thought chilled him
somehow.
“Juss one ... what kin ye expect?”
“Is it the Emergency Hospital?”
“Yes I reckon they’ll let you see him as it’s a matter of business.
He’s groanin somethin dreadful.”
“Now if I could get a few good witnesses.”
“Mike Doheny seen it all.... He’s on the force. He’s a good frien of
Gus’s.”
“By gad we’ve got a case and a half.... Why they’ll settle out of
court.... I’ll go right up to the hospital.”
A fresh volley of wails came from the other room.
“Oh, that brat,” she whispered, screwing up her face. “We could
use the money all right Mr. Baldwin....”
“Well I must go.” He picked up his hat. “And I certainly will do my
best in this case. May I come by and report progress to you from
time to time?”
“I hope you will.”
When they shook hands at the door he couldn’t seem to let go her
hand. She blushed.
“Well goodby and thank you very much for callin,” she said stiffly.
Baldwin staggered dizzily down the stairs. His head was full of
blood. The most beautiful girl I’ve ever seen in my life. Outside it had
begun to snow. The snowflakes were cold furtive caresses to his hot
cheeks.
The sky over the Park was mottled with little tiptailed clouds like a
field of white chickens.
“Look Alice, lets us go down this little path.”
“But Ellen, my dad told me to come straight home from school.”
“Scarecat!”
“But Ellen those dreadful kidnappers....”
“I told you not to call me Ellen any more.”
“Well Elaine then, Elaine the lily maid of Astalot.”
Ellen had on her new Black Watch plaid dress. Alice wore glasses
and had legs thin as hairpins.
“Scarecat!”
“They’re dreadful men sitting on that bench. Come along Elaine
the fair, let’s go home.”
“I’m not scared of them. I could fly like Peter Pan if I wanted to.”
“Why dont you do it?”
“I dont want to just now.”
Alice began to whimper. “Oh Ellen I think you’re mean.... Come
along home Elaine.”
“No I’m going for a walk in the Park.”
Ellen started down the steps. Alice stood a minute on the top step
balancing first on one foot then on the other.
“Scaredy scaredy scarecat!” yelled Ellen.
Alice ran off blubbering. “I’m goin to tell your mommer.”
Ellen walked down the asphalt path among the shrubbery kicking
her toes in the air.
Ellen in her new dress of Black Watch plaid mummy’d bought at
Hearn’s walked down the asphalt path kicking her toes in the air.
There was a silver thistle brooch on the shoulder of the new dress of
Black Watch plaid mummy’d bought at Hearn’s. Elaine of
Lammermoor was going to be married. The Betrothed. Wangnaan
nainainai, went the bagpipes going through the rye. The man on the
bench has a patch over his eye. A watching black patch. A black
watching patch. The kidnapper of the Black Watch, among the
rustling shrubs kidnappers keep their Black Watch. Ellen’s toes dont
kick in the air. Ellen is terribly scared of the kidnapper of the Black
Watch, big smelly man of the Black Watch with a patch over his eye.
She’s scared to run. Her heavy feet scrape on the asphalt as she
tries to run fast down the path. She’s scared to turn her head. The
kidnapper of the Black Watch is right behind. When I get to the
lamppost I’ll run as far as the nurse and the baby, when I get to the
nurse and the baby I’ll run as far as the big tree, when I get to the big
tree.... Oh I’m so tired.... I’ll run out onto Central Park West and
down the street home. She was scared to turn round. She ran with a
stitch in her side. She ran till her mouth tasted like pennies.
“What are you running for Ellie?” asked Gloria Drayton who was
skipping rope outside the Norelands.
“Because I wanted to,” panted Ellen.
Winey afterglow stained the muslin curtains and filtered into the
blue gloom of the room. They stood on either side of the table. Out of
a pot of narcissus still wrapped in tissue paper starshaped flowers
gleamed with dim phosphorescence, giving off a damp earthsmell
enmeshed in indolent prickly perfume.
“It was nice of you to bring me these Mr. Baldwin. I’ll take them up
to Gus at the hospital tomorrow.”
“For God’s sake dont call me that.”
“But I dont like the name of George.”
“I dont care, I like your name, Nellie.”
He stood looking at her; perfumed weights coiled about his arms.
His hands dangled like empty gloves. Her eyes were black, dilating,
her lips pouting towards him across the flowers. She jerked her
hands up to cover her face. His arm was round her little thin
shoulders.
“But honest Georgy, we’ve got to be careful. You mustn’t come
here so often. I dont want all the old hens in the house to start
talkin.”
“Dont worry about that.... We mustn’t worry about anything.”
“I’ve been actin’ like I was crazy this last week.... I’ve got to quit.”
“You dont think I’ve been acting naturally, do you? I swear to God
Nellie I’ve never done anything like this before. I’m not that kind of a
person.”
She showed her even teeth in a laugh. “Oh you kin never tell
about men.”
“But if it weren’t something extraordinary and exceptional you
dont think I’d be running after you this way do you? I’ve never been
in love with anybody but you Nellie.”
“That’s a good one.”
“But it’s true.... I’ve never gone in for that sort of thing. I’ve worked
too hard getting through lawschool and all that to have time for girls.”
“Makin up for lost time I should say.”
“Oh Nellie dont talk like that.”
“But honestly Georgy I’ve got to cut this stuff out. What’ll we do
when Gus comes out of the hospital? An I’m neglectin the kid an
everythin.”
“Christ I dont care what happens.... Oh Nellie.” He pulled her face
round. They clung to each other swaying, mouths furiously mingling.
“Look out we almost had the lamp over.”
“God you’re wonderful, Nellie.” Her head had dropped on his
chest, he could feel the pungence of her tumbled hair all through
him. It was dark. Snakes of light from the streetlamp wound greenly
about them. Her eyes looked up into his frighteningly solemnly black.
“Look Nellie lets go in the other room,” he whispered in a tiny
trembling voice.
“Baby’s in there.”
They stood apart with cold hands looking at each other. “Come
here an help me. I’ll move the cradle in here.... Careful not to wake
her or she’ll bawl her head off.” Her voice crackled huskily.
The baby was asleep, her little rubbery face tight closed, minute
pink fists clenched on the coverlet.
“She looks happy,” he said with a forced titter.
“Keep quiet cant you.... Here take yer shoes off.... There’s been
enough trampin o men’s shoes up here.... Georgy I wouldn’t do this,
but I juss cant help....”
He fumbled for her in the dark. “You darling....” Clumsy he
brooded over her, breathing crazily deep.
“Flatfoot you’re stringin us....”

“I aint, honest I’d swear by me muder’s grave it’s de trutt....
Latitude toityseven soutt by twelve west.... You go dere an see.... On
dat island we made in de second officer’s boat when de Elliot P.
Simkins foundered der was four males and fortyseven females
includin women an children. Waren’t it me dat tole de reporter guy all
about it an it came out in all de Sunday papers?”
“But Flatfoot how the hell did they ever get you away from there?”
“Dey carried me off on a stretcher or I’m a cockeyed lyer. I’ll be a
sonofabitch if I warnt founderin, goin down by de bows like de ole
Elliot P.”
Heads tossed back on thick necks let out volleys of laughter,
glasses were banged on the round ringmarked table, thighs
resounded with slaps, elbows were poked into ribs.
“An how many guys was in de boat?”
“Six includin Mr. Dorkins de second officer.”
“Seven and four makes eleven.... Jez.... Four an three-elevenths
broads per capita.... Some island.”
“When does the next ferry leave?”
“Better have another drink on that.... Hay Charlie fill ’em up.”
Emile pulled at Congo’s elbow. “Come outside a sec. J’ai
que’quechose a te dire.” Congo’s eyes were wet, he staggered a
little as he followed Emile into the outer bar. “O le p’tit mysterieux.”
“Look here, I’ve got to go call on a lady friend.”
“Oh that’s what’s eating you is it? I always said you was a wise
guy Emile.”
“Look, here’s my address on a piece of paper in case you forget it:
945 West 22nd. You can come and sleep there if you’re not too
pickled, and dont you bring any friends or women or anything. I’m in
right with the landlady and I dont want to spoil it.... Tu comprends.”
“But I wanted you to come on a swell party.... Faut faire un peu la
noce, nom de dieu!...”
“I got to work in the morning.”
“But I got eight months’ pay in my pocket....
“Anyway come round tomorrow at about six. I’ll wait for you.”
“Tu m’emmerdes tu sais avec tes manières;” Congo aimed a jet of
saliva at the spittoon in the corner of the bar and turned back
frowning into the inside room.
“Hay dere sit down Congo; Barney’s goin to sing de Bastard King
of England.”
Emile jumped on a streetcar and rode uptown. At Eighteenth
Street he got off and walked west to Eighth Avenue. Two doors from
the corner was a small store. Over one window was Confiserie,
over the other Delicatessen. In the middle of the glass door white
enamel letters read Emile Rigaud, High Class Table Dainties. Emile
went in. The bell jangled on the door. A dark stout woman with black
hairs over the corners of her mouth was drowsing behind the
counter. Emile took off his hat. “Bonsoir Madame Rigaud.” She
looked up with a start, then showed two dimples in a profound smile.
“Tieng c’est comma ça qu’ong oublie ses ami-es,” she said in a
booming Bordelais voice. “Here’s a week that I say to myself,
Monsieur Loustec is forgetting his friends.”
“I never have any time any more.”
“Lots of work, lots of money, heing?” When she laughed her
shoulders shook and the big breasts under the tight blue bodice.
Emile screwed up one eye. “Might be worse.... But I’m sick of
waiting.... It’s so tiring; nobody regards a waiter.”
“You are a man of ambition, Monsieur Loustec.”
“Que voulez vous?” He blushed, and said timidly “My name’s
Emile.”
Mme. Rigaud rolled her eyes towards the ceiling. “That was my
dead husband’s name. I’m used to that name.” She sighed heavily.
“And how’s business?”
“Comma ci comma ça.... Ham’s gone up again.”
“It’s the Chicago ring’s doing that.... A corner in pork, that’s the
way to make money.”
Emile found Mme. Rigaud’s bulgy black eyes probing his. “I
enjoyed your singing so last time.... I’ve thought of it often.... Music
does one good dont it?” Mme. Rigaud’s dimples stretched and
stretched as she smiled. “My poor husband had no ear.... That gave
me a great deal of pain.”
“Couldn’t you sing me something this evening?”
“If you want me to, Emile?... But there is nobody to wait on
customers.”
“I’ll run in when we hear the bell, if you will permit me.”
“Very well.... I’ve learned a new American song ... C’est chic vous
savez.”
Mme. Rigaud locked the till with a key from the bunch that hung at
her belt and went through the glass door in the back of the shop.
Emile followed with his hat in his hand.
“Give me your hat Emile.”
“Oh dont trouble yourself.”
The room beyond was a little parlor with yellow flowered
wallpaper, old salmon pink portières and, under the gas-bracket from
which hung a bunch of crystals, a piano with photographs on it. The
pianostool creaked when Mme. Rigaud sat down. She ran her
fingers over the keys. Emile sat carefully on the very edge of the
chair beside the piano with his hat on his knees and pushed his face
forward so that as she played she could see it out of the corner of
her eye tilted up towards hers. Madame Rigaud began to sing:
Just a birrd in a geelded cage
A beauteeful sight to see
You’d tink se vas ’appee
And free from all care
Se’s not zo se seems to be....
The bell on the door of the shop jangled loud.
“Permettez,” cried Emile running out.
“Half a pound o bolony sausage sliced,” said a little girl with
pigtails. Emile passed the knife across the palm of his hand and
sliced the sausage carefully. He tiptoed back into the parlor and put
the money on the edge of the piano. Madame Rigaud was still
singing:
Tis sad ven you tink of a vasted life
For yout cannot mate vit age
Beautee vas soooold
For an old man’s gooold
Se’s a birrd in a geelded cage.
Bud stood on the corner of West Broadway and Franklin Street
eating peanuts out of a bag. It was noon and his money was all
gone. The Elevated thundered overhead. Dustmotes danced before
his eyes in the girderstriped sunlight. Wondering which way to go he
spelled out the names of the streets for the third time. A black shiny
cab drawn by two black shinyrumped horses turned the corner sharp
in front of him with a rasp on the cobblestones of red shiny wheels
suddenly braked. There was a yellow leather trunk on the seat
beside the driver. In the cab a man in a brown derby talked loud to a
woman with a gray feather boa round her neck and gray ostrich
plumes in her hat. The man jerked a revolver up to his mouth. The
horses reared and plunged in the middle of a shoving crowd.
Policemen elbowing through. They had the man out on the
curbstone vomiting blood, head hanging limp over his checked vest.
The woman stood tall and white beside him twisting her feather boa
in her hands, the gray plumes in her hat nodding in the striped
sunlight under the elevated.
“His wife was taking him to Europe.... The Deutschland sailing at
twelve. I’d said goodby to him forever. He was sailing on the
Deutschland at twelve. He’d said goodby to me forever.”
“Git oute de way dere;” a cop jabbed Bud in the stomach with his
elbow. His knees trembled. He got to the edge of the crowd and
walked away trembling. Mechanically he shelled a peanut and put it
in his mouth. Better save the rest till evenin. He twisted the mouth of
the bag and dropped it into his pocket.
Under the arclight that spluttered pink and green-edged violet the
man in the checked suit passed two girls. The full-lipped oval face of
the girl nearest to him; her eyes were like a knifethrust. He walked a
few paces then turned and followed them fingering his new satin
necktie. He made sure the horseshoe diamond pin was firm in its
place. He passed them again. Her face was turned away. Maybe she
was.... No he couldn’t tell. Good luck he had fifty dollars on him. He
sat on a bench and let them pass him. Wouldnt do to make a
mistake and get arrested. They didnt notice him. He followed them
down the path and out of the Park. His heart was pounding. I’d give
a million dollars for ... Pray pardon me, isn’t this Miss Anderson? The
girls walked fast. In the crowd crossing Columbus Circle he lost sight
of them. He hurried down Broadway block after block. The full lips,
the eyes like the thrust of a knife. He stared in girls’ faces right and
left. Where could she have gone? He hurried on down Broadway.
Ellen was sitting beside her father on a bench at the Battery. She
was looking at her new brown button shoes. A glint of sunlight
caught on the toes and on each of the little round buttons when she
swung her feet out from under the shadow of her dress.
“Think how it’d be,” Ed Thatcher was saying, “to go abroad on one
of those liners. Imagine crossing the great Atlantic in seven days.”
“But daddy what do people do all that time on a boat?”
“I dunno ... I suppose they walk round the deck and play cards
and read and all that sort of thing. Then they have dances.”
“Dances on a boat! I should think it’d be awful tippy.” Ellen
giggled.
“On the big modern liners they do.”
“Daddy why dont we go?”
“Maybe we will some day if I can save up the money.”
“Oh daddy do hurry up an save a lot of money. Alice Vaughan’s
mother an father go to the White Mountains every summer, but next
summer they’re going abroad.”
Ed Thatcher looked out across the bay that stretched in blue
sparkling reaches into the brown haze towards the Narrows. The
statue of Liberty stood up vague as a sleepwalker among the curling
smoke of tugboats and the masts of schooners and the blunt
lumbering masses of brickbarges and sandscows. Here and there
the glary sun shone out white on a sail or on the superstructure of a
steamer. Red ferryboats shuttled back and forth.
“Daddy why arent we rich?”
“There are lots of people poorer than us Ellie.... You wouldn’t like
your daddy any better if he were rich would you?”
“Oh yes I would daddy.”
Thatcher laughed. “Well it might happen someday.... How would
you like the firm of Edward C. Thatcher and Co., Certified
Accountants?”
Ellen jumped to her feet: “Oh look at that big boat.... That’s the
boat I want to go on.”
“That there’s the Harabic,” croaked a cockney voice beside them.
“Oh is it really?” said Thatcher.
“Indeed it is, sir; as fahne a ship as syles the sea sir,” explained
eagerly a frayed creakyvoiced man who sat on the bench beside
them. A cap with a broken patentleather visor was pulled down over
a little peaked face that exuded a faded smell of whiskey. “Yes sir,
the Harabic sir.”
“Looks like a good big boat that does.”
“One of the biggest afloat sir. I syled on er many’s the tahme and
on the Majestic and the Teutonic too sir, fahne ships both, though a
bit light’eaded in a sea as you might say. I’ve signed as steward on
the Hinman and White Star lahnes these thirty years and now in me
old age they’ve lyed me hoff.”
“Oh well, we all have hard luck sometimes.”
“And some of us as it hall the tahme sir.... I’d be a appy man sir, if
I could get back to the old country. This arent any plyce for an old
man, it’s for the young and strong, this is.” He drew a gout-twisted
hand across the bay and pointed to the statue. “Look at er, she’s
alookin towards Hengland she is.”
“Daddy let’s go away. I dont like this man,” whispered Ellen
tremulously in her father’s ear.
“All right we’ll go and take a look at the sealions.... Good day.”
“You couldn’t fahnd me the price of a cup o coffee, could you now
sir? I’m fair foundered.” Thatcher put a dime in the grimy knobbed
hand.
“But daddy, mummy said never to let people speak to you in the
street an to call a policeman if they did an to run away as fast as you
could on account of those horrible kidnappers.”
“No danger of their kidnapping me Ellie. That’s just for little girls.”
“When I grow up will I be able to talk to people on the street like
that?”
“No deary you certainly will not.”
“If I’d been a boy could I?”
“I guess you could.”
In front of the Aquarium they stopped a minute to look down the
bay. The liner with a tug puffing white smoke against either bow was
abreast of them towering above the ferryboats and harborcraft. Gulls
wheeled and screamed. The sun shone creamily on the upper decks
and on the big yellow blackcapped funnel. From the foremast a
string of little flags fluttered jauntily against the slate sky.
“And there are lots of people coming over from abroad on that
boat arent there daddy?”
“Look you can see ... the decks are black with people.”
Walking across Fiftythird Street from the East River Bud

Korpenning found himself standing beside a pile of coal on the
sidewalk. On the other side of the pile of coal a grayhaired woman in
a flounced lace shirtwaist with a big pink cameo poised on the curve
of her high bosom was looking at his stubbly chin and at the wrists
that hung raw below the frayed sleeves of his coat. Then he heard
himself speak:
“Dont spose I could take that load of coal in back for you ma’am?”
Bud shifted his weight from one foot to the other.
“That’s just what you could do,” the woman said in a cracked
voice. “That wretched coal man left it this morning and said he’d be
back to bring it in. I suppose he’s drunk like the rest of them. I
wonder if I can trust you in the house.”
“I’m from upstate ma’am,” stammered Bud.
“From where?”
“From Cooperstown.”
“Hum.... I’m from Buffalo. This is certainly the city for everyone
being from somewhere else.... Well you’re probably a burglar’s
accomplice, but I cant help it I’ve got to have that coal in.... Come in
my man, I’ll give you a shovel and a basket and if you dont drop any
in the passage or on the kitchen floor, because the scrubwoman’s
just left ... naturally the coal had to come when the floor was clean....
I’ll give you a dollar.”
When he carried in the first load she was hovering in the kitchen.
His caving hungersniff stomach made him totter lightheadedly, but he
was happy to be working instead of dragging his feet endlessly along
pavements, across streets, dodging drays and carts and streetcars.
“How is it you haven’t got a regular job my man,” she asked as he
came back breathless with the empty basket.
“I reckon it’s as I aint caught on to city ways yet. I was born an
raised on a farm.”
“And what did you want to come to this horrible city for?”
“Couldn’t stay on the farm no more.”
“It’s terrible what’s going to become of this country if all the fine
strong young men leave the farms and come into the cities.”
“Thought I could git a work as a longshoreman, ma’am, but
they’re layin’ men off down on the wharves. Mebbe I kin go to sea as
a sailor but nobody wants a green hand.... I aint et for two days now.”
“How terrible.... Why you poor man couldn’t you have gone to
some mission or something?”
When Bud had brought the last load in he found a plate of cold
stew on the corner of the kitchen table, half a loaf of stale bread and
a glass of milk that was a little sour. He ate quickly barely chewing
and put the last of the stale bread in his pocket.
“Well did you enjoy your little lunch?”
“Thankye ma’am.” He nodded with his mouth full.
“Well you can go now and thank you very much.” She put a
quarter into his hand. Bud blinked at the quarter in the palm of his
hand.
“But ma’am you said you’d give me a dollar.”
“I never said any such thing. The idea.... I’ll call my husband if you
dont get out of here immediately. In fact I’ve a great mind to notify
the police as it is....”
Without a word Bud pocketed the quarter and shuffled out.
“Such ingratitude,” he heard the woman snort as he closed the
door behind him.
A cramp was tying knots in his stomach. He turned east again
and walked the long blocks to the river with his fists pressed tight in
under his ribs. At any moment he expected to throw up. If I lose it it
wont do me no good. When he got to the end of the street he lay
down on the gray rubbish slide beside the wharf. A smell of hops
seeped gruelly and sweet out of the humming brewery behind him.
The light of the sunset flamed in the windows of factories on the
Long Island side, flashed in the portholes of tugs, lay in swaths of
curling yellow and orange over the swift browngreen water, glowed
on the curved sails of a schooner that was slowly bucking the tide up
into Hell Gate. Inside him the pain was less. Something flamed and
glowed like the sunset seeping through his body. He sat up. Thank
Gawd I aint agoin to lose it.
On deck it’s damp and shivery in the dawn. The ship’s rail is wet
when you put your hand on it. The brown harborwater smells of
washbasins, rustles gently against the steamer’s sides. Sailors are
taking the hatches off the hold. There’s a rattle of chains and a
clatter from the donkeyengine where a tall man in blue overalls
stands at a lever in the middle of a cloud of steam that wraps round
your face like a wet towel.
“Muddy is it really the Fourth of July?”
Mother’s hand has grasped his firmly trailing him down the
companionway into the dining saloon. Stewards are piling up
baggage at the foot of the stairs.
“Muddy is it really the Fourth of July?”
“Yes deary I’m afraid it is.... A holiday is a dreadful time to arrive.
Still I guess they’ll all be down to meet us.”
She has her blue serge on and a long trailing brown veil and the
little brown animal with red eyes and teeth that are real teeth round
her neck. A smell of mothballs comes from it, of unpacking trunks, of
wardrobes littered with tissuepaper. It’s hot in the dining saloon, the
engines sob soothingly behind the bulkhead. His head nods over his
cup of hot milk just colored with coffee. Three bells. His head snaps
up with a start. The dishes tinkle and the coffee spills with the
trembling of the ship. Then a thud and rattle of anchorchains and
gradually quiet. Muddy gets up to look through the porthole.
“Why it’s going to be a fine day after all. I think the sun will burn
through the mist.... Think of it dear; home at last. This is where you
were born deary.”
“And it’s the Fourth of July.”
“Worst luck.... Now Jimmy you must promise me to stay on the
promenade deck and be very careful. Mother has to finish packing.
Promise me you wont get into any mischief.”
“I promise.”
He catches his toe on the brass threshold of the smokingroom
door and sprawls on deck, gets up rubbing his bare knee just in time
to see the sun break through chocolate clouds and swash a red
stream of brightness over the putty-colored water. Billy with the
freckles on his ears whose people are for Roosevelt instead of for
Parker like mother is waving a silk flag the size of a handkerchief at
the men on a yellow and white tugboat.
“Didjer see the sun rise?” he asks as if he owned it.
“You bet I saw it from my porthole,” says Jimmy walking away
after a lingering look at the silk flag. There’s land close on the other
side; nearest a green bank with trees and wide white grayroofed
houses.
“Well young feller, how does it feel to be home?” asks the tweedy
gentleman with droopy mustaches.
“Is that way New York?” Jimmy points out over the still water
broadening in the sunlight.
“Yessiree-bobby, behind yonder bank of fog lies Manhattan.”
“Please sir what’s that?”
“That’s New York.... You see New York is on Manhattan Island.”

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Macroeconomics for Today 8th Edition

Tucker Test Bank

1. Classical economists believed that:

9. Which of the following statements is true about Say's law?

13. In the view of the classical school, unemployment:

18. The Keynesian view stresses that:

23. According to John Maynard Keynes:

24. Keynesian economics:

26. A primary emphasis of the Keynesian school is the economy:

28. The consumption function shows the relationship between:

37. The consumption function expresses the:

38. A movement along the consumption function is caused by a change in:

40. A movement along the consumption function is caused by a change in:

45. A movement along in the consumption function is caused by a change in:

49. The relationship between consumption and disposable income is the:

50. If people expect prices to fall in the future,

52. A movement along a consumption function is caused by:

55. \If the interest rate increases, then the:

56. If people's real assets increase, then the:

66. Autonomous consumption is consumption that:

69. Autonomous consumption is equal to the level of consumption associated with:

70. Autonomous consumption spending is consumption spending:

75. That part of disposable income not spent on consumption is:

81. Use the table below to answer the following question.

What is the marginal propensity to consume?

82. Use the table below to answer the following question.

What is the marginal propensity to consume?

84. Mathematically, the marginal propensity to consume is:

90. The marginal propensity to consume (MPC) is the slope of the:

91. The slope of the consumption function is called the:

96. The marginal propensity to consume is:

98. The ratio of a change in consumption to a change in disposable income is the:

99. The marginal propensity to consume measures the ratio of the:

Exhibit 8-1 Disposable income and consumption data

Disposable Income Change in Consumption

106. The marginal propensity to save is:

108. The marginal propensity to save is:

109. The relationship between MPC and MPS is:

110. If the marginal propensity to consume = 0.75, then:

Exhibit 8-2 Consumption function

111. As shown in Exhibit 8-2, autonomous consumption is:

112. As shown in Exhibit 8-2, saving occurs:

Exhibit 8-3 Disposable income and consumption data

Disposable Marginal propensity to Marginal propensity to

Note: All amounts are in billions of dollars per year.

115. As shown in Exhibit 8-3, autonomous consumption is:

117. As shown in Exhibit 8-3, if disposable income is $600, saving is:

122. As shown in Exhibit 8-4, autonomous consumption is:

123. As shown in Exhibit 8-4, dissaving occurs:

124. As shown in Exhibit 8-4, saving occurs:

128. A downward shift in the consumption function can be caused by:

131. A shift in the consumption function:

135. Real investment spending is ____ real personal consumption.

139. In the short-run Keynesian model, investment is:

140. If the interest rate rises, then firms' investment spending:

154. If a major technological breakthrough occurs, then the:

155. If the interest rate increases, then the:

158. Which of the following will increase investment spending?

162. The sum of consumption and investment is:

163. In the aggregate expenditures model, equilibrium occurs if:

Exhibit 8-5 Aggregate expenditures function

168. As shown in Exhibit 8-5, saving occurs:

172. As shown in Exhibit 8-5, this economy is in macro equilibrium at: