Chapter 8 Test

Topics: Consumption function, Macroeconomics, Income Pages: 2 (407 words) Published: October 3, 2010
1.The most important determinant of consumption and saving is the: A)level of bank credit.
B)level of income.
C)interest rate.
D)price level.

2.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.

3.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. D)increases consumption because it shifts the consumption schedule upward.

4.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.

5.Tessa's break-even level of income is $10,000 and her MPC is 0.75. If her actual disposable income is $16,000, her level of: A)consumption spending will be $14,500.
B)consumption spending will be $15,500.
C)consumption spending will be $13,000.
D)saving will be $2,500.

6.Dissaving means:
A)zee same zing as datsaving!
B)that households are spending more than their current incomes. C)that saving and investment are equal.
D)that disposable income is less than zero.

7.At the point where the consumption schedule intersects the 45-degree line: A)the MPC equals 1.
B)the APC is zero.
C)saving equals income.
D)saving is zero.

8.The saving schedule is such that as aggregate income increases by a certain amount saving: A)increases by the same amount as the...
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