Deck 21: Influences on Aggregate Demand: Consumption

Question 1

The Keynesian consumption function is C = a + bYd. What does "a" represent?

A) The marginal propensity to consume
B) Disposable income
C) Autonomous consumption spending
D) Total consumption

Answer 1

C

Question 2

The Keynesian consumption function is C = a + bYd. What does Yd represent?

A) The marginal propensity to consume
B) Disposable income
C) Autonomous spending
D) Total consumption

Answer 2

B

Question 3

The Keynesian consumption function is C = a + bYd. What does b represent?

A) The marginal propensity to consume
B) Disposable income
C) Autonomous spending
D) Total consumption

Answer 3

A

Question 4

The equation for marginal propensity to consume is:

A) Consumption / income
B) Consumption / sales
C) Change in consumption / change in income
D) Change in consumption / total income

Question 5

The average propensity to consume is measured by:

A) Consumption / income
B) Consumption / sales
C) Change in consumption / change in income
D) Change in consumption / total income

Question 6

If consumption is given by C= 10 + 0.8 Yd then as income increases:

A) The size of the marginal propensity to consume increases and approaches the average propensity to consume.
B) The size of the marginal propensity to consume approaches 1.
C) The size of the average propensity to consume approaches infinity.
D) The size of the average propensity to consume approaches the marginal propensity to consume.

Question 7

Higher interest rates are likely to increase consumption.

Question 8

The bigger the marginal propensity to consume the more is spent out of each pound.

Question 9

As income increases the marginal propensity to consume will probably fall.

Question 10

Friedman's theory of consumption focused not on current income but on _________ income.

Question 11

Spending that takes place even when income is zero is known as:

A) Zero spending
B) Dis-saving
C) Marginal spending
D) None of the above

Question 12

Disposable income is the income an individual has from all sources minus taxes and national insurance contributions.

Question 13

What is the level of consumption given C = 10 billion + 0.4Yd when disposable income is £100 billion?

A) £110 billion
B) £50 billion
C) £70 billion
D) £40 billion

Question 14

What is the level of consumption given C = 25 billion + 0.25Yd when disposable income is £60 billion?

A) £40 billion
B) £50 billion
C) £85 billion
D) £45 billion

Question 15

Present spending would not significantly change given a current one off wage bonus according to the:

A) Permanent income theory
B) Predictable income theory
C) Present income theory
D) Potential income theory