Simple economies can be described in terms of three major economic flows. Which of the following
options is correct?
[1]
income, spending and saving
[2]
income, spending and exports
[3]
income, saving and production
[4]
income, consumption and production
[5]
None of options [1] to [4] is correct.
3.2.
In the simplest possible Keynesian macroeconomic model
…
[1]
the money market plays an important role.
[2]
government is an important employer of factors of production.
[3]
households import products and sell their production on international markets.
[4]
wages are flexible.
[5]
production adjusts to changes in spending.
3.3.
The consumption function shows
…
[1]
that the MPC increases in proportion to the GDP.
[2]
that households consume more when interest rates are low.
[3]
that consumption depends primarily on the level of business investment.
[4]
the amounts households plan or intend to consume at various possible levels of aggregate
income.
[5]
that consumption may be zero if the population is very poor.

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3.4.
The consumption function is based on the premise that as income increases, consumption
expenditure
…
[1]
increases by the same amount.
[2]
increases by a smaller amount.
[3]
increases by a larger amount.
[4]
remains constant since the consumption function does not shift.
[5]
remains constant unless saving also changes.
3.5.
Which of the following statements is correct?
[1]
Consumption spending is a smaller variable than investment in the simple Keynesian model.
[2]
Investment spending is smaller but more constant than consumption spending.
[3]
Investment spending is smaller but less predictable than consumption spending.
[4]
The investment decision involves only the cost of capital goods.
[5]
There is a direct relationship between the interest rate and the expected return on investment
spending.
3.6.
In the aggregate expenditures model, the size of the MPC is assumed to be
…
[1]
less than zero.
[2]
greater than one.
[3]
greater than zero, but less than one.
[4]
greater than zero, but less than ten.
[5]
equal to income.
3.7.
The equation C = 35 + .75Y, where C is consumption and Y is income, tells us that
…
[1]
households will consume three-fourths of whatever level of disposable income they receive.
[2]
households will consume R35 if their disposable income is zero and will consume three-
fourths of any increase in disposable income they receive.
[3]
there is an inverse relationship between disposable income and consumption.
[4]
households will save R35 if their disposable income is zero and will consume three-fourths of
any increase in disposable income they receive.
[5]
induced consumption is zero.
3.8.
In the simple Keynesian model which of the following is not correct?
[1]
C equals total consumption spending.
[2]
Y equals income.
[3]
Induced consumption is MPC*Y.
[4]
MPC + MPS = 1.
[5]
Equilibrium is where C=Y.