multiple choice ch 8

# multiple choice ch 8 - Question 1 Saving equals Selected...

This preview shows pages 1–7. Sign up to view the full content.

Question 1 1 out of 1 points Saving equals Selected Answer: disposable income minus consumption Correct Answer: disposable income minus consumption Feedback: Correct. Disposable income can only be consumed or saved, so C + S = DI and rearranged , DI - C = S. Question 2 0 out of 1 points As disposable income decreases, ceteris paribus, Selected Answer: consumption increases and saving decreases Correct Answer: both consumption and saving decrease

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Feedback: Both consumpti on and savings are directly related to disposable income, so the less disposable income there is, the less consumpti on and savings will be. See p. 148. Question 3 1 out of 1 points Households tend to spend a larger portion of Selected Answer: a small disposable income than a large disposable income Correct Answer: a small disposable income than a large disposable income
Feedback: Correct. As a percentag e of disposable income, poorer household s tend to spend more than richer ones. They have less total money available to buy goods, so they have less money available to save as a result. Richer household s, however, can buy what they need and still have money left over to save. See p. 148. Question 4 1 out of 1 points If consumption spending increases from \$358 to \$367 billion when disposable income increases from \$412 to \$427 billion, it can be concluded that the marginal propensity to consume is Selected Answer: 0.6 Correct Answer: 0.6

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Feedback: Correct. The MPC = change in consumpti on/change in income = (367 - 358)/(427- 412) = 9/15 = 0.6. This means that 60% of the additional income earned (\$15 billion) here is consumed. See p. 150. Question 5 0 out of 1 points If disposable income is \$375 billion when the average propensity to consume is 0.8, it can be concluded that Selected Answer: the marginal propensity to save is 0.2 Correct Answer: saving is \$75 billion
Feedback: Average propensity consume (APC) equals consumpti on divided by disposable income, so if the APC = 0.8, then 80% of disposable income is consumed. That must mean that 20% of disposable income is saved, or 0.2 * \$375 billion = \$75 billion. We can't say anything about marginal propensitie s since these deal with changes in income and we only have one income given here. Consumpti on equals 0.8 * \$375 billion = \$300 billion here. Reread p. 150 in the text. Question 6 0 out of 1 points As the disposable income of the economy increases

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Answer: both the APC and the APS rise Correct Answer: the APC falls and the APS rises Feedback: As disposable income rises, household s tend to spend a smaller percentag e of total income and save more than lower income household s. See p. 148, particularly Table 8.1 columns 4 and 5. Question
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 09/10/2009 for the course ECO 2251 taught by Professor Kirkland during the Spring '09 term at Troy.

### Page1 / 33

multiple choice ch 8 - Question 1 Saving equals Selected...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online