Question 1

If your real disposable income goes up by $1,000 per week, and your real consumption spending goes up by $800 per week, you have an marginal propensity to save of
A) 0.2.
B) 0.8.
C) 1.2.
D) 1.0.

Accepted Answer

The marginal propensity to save (MPS) is the ratio of the change in saving to the change in disposable income. In this case, the change in disposable income is $1,000 per week, and the change in consumption spending is $800 per week.

Therefore, the change in saving is:

$1,000 per week - $800 per week = $200 per week

The MPS is then calculated as:

MPS = Change in saving / Change in disposable income
MPS = $200 per week / $1,000 per week
MPS = 0.2

So the answer is A) 0.2, indicating that for every additional dollar of disposable income, the person saves 20 cents and spends 80 cents.

Question 2

-In the above table, the average propensity to consume when income is $10,000 is
A) 0.8.
B) 0.2.
C) 0.0.
D) 0.9.

Accepted Answer

The answer of 
-In the above table, the average propensity...

Question 3

The consumption function is the relationship between
A) real consumption spending and real taxes.
B) real consumption spending and investment spending.
C) real consumption spending and real disposable income.
D) real consumption spending and real saving.

Accepted Answer

The consumption function is the relationship between real consumption spending and real disposable income. Real disposable income is the amount of income a household has after taxes and transfer payments, and it is what is available for consumption and saving. As real disposable income increases, consumption typically increases as well, but not necessarily by the same amount. Therefore, the consumption function shows the relationship between these two variables.

Question 4

Which one of the following would shift your consumption function in an upward direction?
A) an increase in your wealth
B) a decrease in your wealth
C) an increase in your real disposable income
D) a decrease in your real disposable income

Accepted Answer

The answer of Which one of the following would shift...

Question 5

-Consider the above figure. At an income of $60 we would expect saving to be equal to
A) $60.
B) $40.
C) $10.
D) $0.

Accepted Answer

The answer of 
-Consider the above figure. At an income...

Question 6

At the point at which planned real consumption spending is equal to real disposable income
A) the consumption function is above the 45-degree line.
B) the consumption function is below the 45-degree line.
C) the consumption function intersects the 45-degree line.
D) the consumption function intersects the savings function.

Accepted Answer

At the point where planned real consumption spending is equal to real disposable income, the consumption function intersects the 45-degree line. This is because at this point, all income is being consumed and there is no saving, thus the consumption function is equal to the 45-degree line (which represents the line where consumption and income are equal).

Question 7

-Consider the above figure. Autonomous consumption, in this scenario, is equal to
A) $30.
B) $40.
C) $60.
D) $80.

Accepted Answer

The answer of 
-Consider the above figure. Autonomous consumption, in...

Question 8

If your real disposable income goes up by $1,000 per week, and your real consumption spending goes up by $800 per week, you have a marginal propensity to consume of
A) 0.2.
B) 0.8.
C) 1.2.
D) 1.0.

Accepted Answer

Marginal propensity to consume (MPC) is the ratio of the change in consumption spending to the change in disposable income. In this scenario, MPC = change in consumption/change in disposable income = $800/$1,000 = 0.8. So, the answer is B.

Question 9

The relationship between planned consumption and real disposable income is referred to as
A) the wealth function.
B) the saving function.
C) the multiplier.
D) the consumption function.

Accepted Answer

The relationship between planned consumption and real disposable income is referred to as the consumption function. This function shows the level of consumption expenditure that will occur at different levels of income.

Question 10

-Consider the above figure. The equation for the saving function is
A) S = 40 - 0.67  .
B) S = 40 + 0.33  .
C) S = -40 + 0.67  .
D) S = -40 - 0.33  .

Accepted Answer

The answer of 
-Consider the above figure. The equation for...

Question 11

-Consider the above figure. The equation for the consumption function is
A) C = 40 + 60  .
B) C = 40 + 50  .
C) C = 40 + 0.33  .
D) C = 40 + 0.1  .

Accepted Answer

The answer of 
-Consider the above figure. The equation for...

Question 12

-In the above table, the marginal propensity to consume when disposable income changes from $5,000 to $6,000 is
A) 0.8.
B) 0.75.
C) 0.6.
D) 0.5.

Accepted Answer

The answer of 
-In the above table, the marginal propensity...

Question 13

According to Keynes, the most important determinant of an individual's real saving is
A) interest rates.
B) the foreign exchange rate.
C) the individual's real disposable income.
D) the level of investment.

Accepted Answer

According to Keynes, the most important determinant of an individual's real saving is their real disposable income. This is because individuals save a portion of their disposable income, and as their disposable income increases, so does their ability to save. Interest rates and the level of investment may also affect an individual's saving decisions, but they are not as significant as disposable income. The foreign exchange rate is not directly related to an individual's saving decisions.

Question 14

-In the above table, the marginal propensity to save when disposable income changes from $1,000 to $2,000 is
A) 0.1.
B) 0.2.
C) 0.8.
D) -0.2.

Accepted Answer

The answer of 
-In the above table, the marginal propensity...

Question 15

-Consider the above figure. At income level  = $30, the APC is equal to
A) 1.25.
B) 1.67.
C) 1.05.
D) 0.05.

Accepted Answer

The answer of 
-Consider the above figure. At income level...

Question 16

-Consider the above figure. At income level  = $110, the APS is equal to
A) 0.64.
B) 0.32
C) 1.10.
D) -0.36.

Accepted Answer

The answer of 
-Consider the above figure. At income level...

Question 17

-In the above table, dissaving occurs at every level of income below
A) $10,000.
B) $8,000.
C) $7,000.
D) $5,000.

Accepted Answer

The answer of 
-In the above table, dissaving occurs at...

Question 18

Assuming that  = $20,000 and C = $22,000, we would find that the average propensity to consume would be equal to
A) 0.9.
B) 1.1.
C) 1.8.
D) 0.8.

Accepted Answer

The answer of Assuming that  = $20,000 and C...

Question 19

Assuming that  = $20,000 and C = $22,000, we would find that the average propensity to save equals
A) 0.9.
B) 1.1.
C) -0.1.
D) -0.8.

Accepted Answer

The given information does not provide any information about the income of the individual, hence we cannot calculate the average propensity to save. The formula to calculate the average propensity to save is: 
APS = (Savings/Income)
Without information on income, we cannot compute APS.

Question 20

-In the above table, the average propensity to save when disposable income is $5,000 is
A) 0.2.
B) 0.1.
C) 0.0.
D) -0.1.

Accepted Answer

The average propensity to save (APS) is calculated as total savings divided by total disposable income. If the savings at a disposable income of $5,000 is $0 (implied by the question not providing specific numbers), then the APS would be $0 / $5,000 = 0.0, indicating that there is no saving at this level of income.

Quiz 12: Consumption, Real GDP, and the Multiplier

If your real disposable income goes up by $1,000 per week, and your real consumption spending goes up by $800 per week, you have an marginal propensity to save of

-In the above table, the average propensity to consume when income is $10,000 is

The consumption function is the relationship between

Which one of the following would shift your consumption function in an upward direction?

-Consider the above figure. At an income of $60 we would expect saving to be equal to

At the point at which planned real consumption spending is equal to real disposable income

-Consider the above figure. Autonomous consumption, in this scenario, is equal to

If your real disposable income goes up by $1,000 per week, and your real consumption spending goes up by $800 per week, you have a marginal propensity to consume of

The relationship between planned consumption and real disposable income is referred to as

-Consider the above figure. The equation for the saving function is

-Consider the above figure. The equation for the consumption function is

-In the above table, the marginal propensity to consume when disposable income changes from $5,000 to $6,000 is

According to Keynes, the most important determinant of an individual's real saving is

-In the above table, the marginal propensity to save when disposable income changes from $1,000 to $2,000 is

-Consider the above figure. At income level = $30, the APC is equal to

-Consider the above figure. At income level = $110, the APS is equal to

-In the above table, dissaving occurs at every level of income below

Assuming that = $20,000 and C = $22,000, we would find that the average propensity to consume would be equal to

Assuming that = $20,000 and C = $22,000, we would find that the average propensity to save equals

-In the above table, the average propensity to save when disposable income is $5,000 is