chapter 8 rev

chapter 8 rev - 1.If Carol's disposable income increases...

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Dr. Alshriaan Ch 8 review 111 1 1. If Carol's disposable income increases from \$1,200 to \$1,700 and her level of saving increases from minus \$100 to a plus \$100, her marginal propensity to: A) save is three-fifths. B) consume is one-half. C) consume is three-fifths. D) consume is one-sixth. Answer: C 2. With an MPS of .4, the MPC will be: A) 1.0 minus .4. B) .4 minus 1.0. C) the reciprocal of the MPS. D) .4. Answer: A 3. The MPC can be defined as that fraction of a: A) change in income that is not spent. B) change in income that is spent. C) given total income that is not consumed. D) given total income that is consumed. Answer: B 6. The 45-degree line on a graph relating consumption and income shows: A) all points where the MPC is constant. B) all points at which saving and income are equal. C) all the points at which consumption and income are equal. D) the amounts households will plan to save at each possible level of income. Answer: C 7. As disposable income goes up the: A) APC falls. B) APS falls. C) volume of consumption declines absolutely. D) volume of investment diminishes. Answer: A 8. The consumption schedule shows: A) that the MPC increases in proportion to GDP. B) that households consume more when interest rates are low. C) that consumption depends primarily on the level of business investment. D) the amounts households intend to consume at various possible levels of aggregate income. Answer: D 9. The consumption schedule relates: A) consumption to the level of disposable income. B) saving to the level of disposable income. C) disposable income to domestic income. D) consumption to saving. Answer: A 10. A decline in disposable income: A) increases consumption by moving upward along a specific consumption schedule. B) decreases consumption because it shifts the consumption schedule downward. C) decreases consumption by moving downward along a specific consumption schedule.

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Dr. Alshriaan Ch 8 review 111 2 D) increases consumption because it shifts the consumption schedule upward. Answer: C 11. The APC is calculated as: A) change in consumption / change in income. B) consumption / income. C) change in income / change in consumption. D) income / consumption. Answer: B 12. The consumption schedule shows: A) a direct relationship between aggregate consumption and accumulated wealth. B) a direct relationship between aggregate consumption and aggregate income. C) an inverse relationship between aggregate consumption and accumulated financial wealth. D) an inverse relationship between aggregate consumption and aggregate income. Answer: B 13. The APC can be defined as the fraction of a: A) change in income that is not spent. B)
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This note was uploaded on 10/11/2011 for the course ECON 102 taught by Professor Ronaldlewin during the Spring '11 term at Santa Barbara City.

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chapter 8 rev - 1.If Carol's disposable income increases...

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