Question 1

A downward shift of the consumption function can be caused by:

Accepted Answer

A)  a decrease in income.
B)  a decrease in income
C)  an increase in income.
D)  an increase in income
E)  expectations of higher permanent incom.F) expectations of higher permanent incomG) a decrease in wealthH) a decrease in wealth.I) G) and H)
J) All of the above

Question 2

Precautionary savings are:

Accepted Answer

A)  bequests.
B)  savings for emergency situations.
C)  loans from banks.
D)  borrowing from credit cards.E) A) and B)
F) C) and D)

Question 3

Using graphs of the consumption function, show how consumption reacts to each of these factors.
(a) The stock market booms.
(b) Consumers become more optimistic about the state of the economy.
(c) The minimum wage falls in the economy.

Accepted Answer

The answer of Using graphs of the consumption function, show...

Question 4

If there is a temporary rise in income, a consumption smoother will exhibit _____ in consumption, and a hand-to-mouth consumer will exhibit _____ in consumption.

Accepted Answer

A)  a small increase; a large increase
B)  a large increase; a large increase
C)  no change; a large increase
D)  a large increase; no changeE) A) and D)
F) C) and D)

Question 5

What is your permanent income marginal propensity to consume (MPC)  if your income permanently changes by $20,000 and your consumption increases by $15,000?

Accepted Answer

A)  0.75
B)  0.25
C)  0.2
D)  1.33E) B) and D)
F) A) and B)

Question 6

The table shows the salary of a construction worker in Japan. The level of saving in 2017 is _____ yen.
  YEAR  REAL  INCOME  (in yen)   REAL  CONSUMPTION  (in yen)  20155.5 million 3.3 million 20166 million 3.6 million 20176.2 million 3.72 million \begin{array} { | c | c | c | } \hline 	ext { YEAR } & \begin{array} { c } 	ext { REAL } \	ext { INCOME } \	ext { (in yen)  }\end{array} & \begin{array} { c } 	ext { REAL } \	ext { CONSUMPTION } \	ext { (in yen)  }\end{array} \\hline 2015 & 5.5 	ext { million } & 3.3 	ext { million } \\hline 2016 & 6 	ext { million } & 3.6 	ext { million } \\hline 2017 & 6.2 	ext { million } & 3.72 	ext { million } \\hline\end{array} YEAR 201520162017​ REAL  INCOME  (in yen)  ​5.5 million 6 million 6.2 million ​ REAL  CONSUMPTION  (in yen)  ​3.3 million 3.6 million 3.72 million ​​

Accepted Answer

A)  2.2 million
B)  3.3 million
C)  1.6 million
D)  2.48 million E) A) and B)
F) A) and C)

Question 7

The opportunity cost of an extra dollar of consumption today is the:

Accepted Answer

A)  same as the marginal benefit of consuming the dollar in the future.
B)  marginal benefit of consumption today.
C)  average benefit from consumption today and in the future.
D)  marginal benefit of consuming a dollar-plus-interest in the future.E) A) and B)
F) A) and C)

Question 8

Why is it beneficial to sign up for your employer's retirement plan?

Accepted Answer

A)  Most employers match your contributions to their retirement plan.
B)  Consumption smoothing can occur only through retirement plans.
C)  It is a good way to avoid paying income taxes on all income earned.
D)  This is a good way to avoid the need for precautionary saving.E) None of the above
F) B) and D)

Question 9

What is your permanent income marginal propensity to consume (MPC)  if your income permanently changes by $50,000 and your consumption increases by $45,000?

Accepted Answer

A)  0.1
B)  1.11
C)  0.9
D)  1.25E) None of the above
F) C) and D)

Question 10

Which of the following is a smart saving strategy?
(i)  Maintain strict control of budgets.
(ii)  Minimize fees paid on retirement or investment accounts.
(iii)  Engage in precautionary saving.
(iv)  Ensure that the value of assets is lower than the value of debt.

Accepted Answer

A)  (i)  and (iii) 
B)  (iv)  only
C)  (i) , (ii) , and (iii) 
D)  (i) , (ii) , (iii) , and (iv) E) All of the above
F) A) and B)

Question 11

Consider the following data. What is the approximate marginal propensity to consume?
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Consumption } \
\text { (millions of \$) }
\end{array} & \begin{array} { c } 
\text { Income } \
\text { (millions of \$) }
\end{array} \
\hline 483 & 575 \
\hline 522 & 621 \
\hline 546 & 650 \
\hline
\end{array}$$

Accepted Answer

The answer of Consider the following data. What is the...

Question 12

Daniela receives a tax refund of $800. Of this, she spends $600 and saves $200. Daniela's marginal propensity to consume is:

Accepted Answer

A)  0.6.
B)  0.6
C)  0.75
D)  0.75.
E)  0.25F) 0.25.G) 0.20H) 0.20.I) D) and G)
J) E) and F)

Question 13

The consumption function can shift because of changes in _____ and in _____.

Accepted Answer

A)  expected income; wealth
B)  expected income; wealth.
C)  expected income; the marginal propensity to consume.
D)  expected income; the marginal propensity to consume
E)  the marginal propensity to consume; wealth.F) the marginal propensity to consume; wealthG) the marginal propensity to save; wealthH) the marginal propensity to save; wealth.I) A) and H)
J) B) and D)

Question 14

Net wealth is:

Accepted Answer

A)  the amount by which income exceeds bills.
B)  the real interest rate on saving.
C)  equivalent to total consumption.
D)  the amount by which assets exceed debts.E) A) and B)
F) All of the above

Question 15

If the average marginal propensity to consume is 0.75, then a $1 million increase in total income will lead to a _____ in consumption.

Accepted Answer

A)  $250,000 increase
B)  $75,000 increase
C)  $750,000 decrease
D)  $750,000 increaseE) A) and B)
F) A) and C)

Question 16

When real interest rates rise, consumption will shift:

Accepted Answer

A)  downward if income rises as well.
B)  upward if the income effect outweighs the substitution effect.
C)  upward if the substitution effect outweighs the income effect.
D)  downward if there is saving.E) B) and D)
F) A) and B)

Question 17

If income increases by $5 billion, and consumption increases by $4 billion, the marginal propensity to consume equals:

Accepted Answer

A)  20
B)  20.
C)  0.8
D)  0.8.
E)  1.25F) 1.25.G) 9H) 9.I) B) and H)
J) A) and H)

Question 18

The consumption function is a plot of the:

Accepted Answer

A)  level of consumption associated with each level of income.
B)  average marginal propensity to consume over time.
C)  level of government spending associated with each level of income.
D)  price of consumer goods and services over time.E) A) and B)
F) None of the above

Question 19

An upward shift of the consumption function can be caused by:

Accepted Answer

A)  expectations of higher incomes
B)  expectations of higher incomes.
C)  expectations of less income
D)  expectations of less income.
E)  a stock market crashF) a stock market crash.G) a reduction in the wealth of householdsH) a reduction in the wealth of households.I) C) and H)
J) A) and H)

Question 20

The marginal propensity to consume is the:

Accepted Answer

A)  initial level of consumption after income is earned.
B)  average level of consumption over time.
C)  fraction of each dollar of extra income that households save.
D)  fraction of each dollar of extra income that households spend on consumption.E) A) and B)
F) A) and D)

Exam 25: Consumption and Saving

A downward shift of the consumption function can be caused by:

Correct Answer
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If the average marginal propensity to consume is 0.75, then a $1 million increase in total income will lead to a _____ in consumption.

Correct Answer
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What is your permanent income marginal propensity to consume (MPC) if your income permanently changes by $20,000 and your consumption increases by $15,000?

Correct Answer
verified

Correct Answer
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Why is it beneficial to sign up for your employer's retirement plan?

Correct Answer
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If there is a temporary rise in income, a consumption smoother will exhibit _ in consumption, and a hand-to-mouth consumer will exhibit _ in consumption.

Correct Answer
verified

When real interest rates rise, consumption will shift:

Correct Answer
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The consumption function can shift because of changes in _ and in _.

Correct Answer
verified

An upward shift of the consumption function can be caused by:

Correct Answer
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The opportunity cost of an extra dollar of consumption today is the:

Correct Answer
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Using graphs of the consumption function, show how consumption reacts to each of these factors. (a) The stock market booms. (b) Consumers become more optimistic about the state of the economy. (c) The minimum wage falls in the economy.

Correct Answer
verified

Daniela receives a tax refund of $800. Of this, she spends $600 and saves $200. Daniela's marginal propensity to consume is:

Correct Answer
verified

Which of the following is a smart saving strategy? (i) Maintain strict control of budgets. (ii) Minimize fees paid on retirement or investment accounts. (iii) Engage in precautionary saving. (iv) Ensure that the value of assets is lower than the value of debt.

Correct Answer
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Net wealth is:

Correct Answer
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Precautionary savings are:

Correct Answer
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What is your permanent income marginal propensity to consume (MPC) if your income permanently changes by $50,000 and your consumption increases by $45,000?

Correct Answer
verified

The consumption function is a plot of the:

Correct Answer
verified

The marginal propensity to consume is the:

Correct Answer
verified

Correct Answer
verified

If income increases by $5 billion, and consumption increases by $4 billion, the marginal propensity to consume equals:

Correct Answer
verified

Exam 25: Consumption and Saving

A downward shift of the consumption function can be caused by:

Correct AnswerverifiedShow Answer

If the average marginal propensity to consume is 0.75, then a $1 million increase in total income will lead to a _____ in consumption.

Correct AnswerverifiedShow Answer

What is your permanent income marginal propensity to consume (MPC) if your income permanently changes by $20,000 and your consumption increases by $15,000?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Why is it beneficial to sign up for your employer's retirement plan?

Correct AnswerverifiedShow Answer

If there is a temporary rise in income, a consumption smoother will exhibit _____ in consumption, and a hand-to-mouth consumer will exhibit _____ in consumption.

Correct AnswerverifiedShow Answer

When real interest rates rise, consumption will shift:

Correct AnswerverifiedShow Answer

The consumption function can shift because of changes in _____ and in _____.

Correct AnswerverifiedShow Answer

An upward shift of the consumption function can be caused by:

Correct AnswerverifiedShow Answer

The opportunity cost of an extra dollar of consumption today is the:

Correct AnswerverifiedShow Answer

Using graphs of the consumption function, show how consumption reacts to each of these factors. (a) The stock market booms. (b) Consumers become more optimistic about the state of the economy. (c) The minimum wage falls in the economy.

Correct AnswerverifiedShow Answer

Daniela receives a tax refund of $800. Of this, she spends $600 and saves $200. Daniela's marginal propensity to consume is:

Correct AnswerverifiedShow Answer

Which of the following is a smart saving strategy? (i) Maintain strict control of budgets. (ii) Minimize fees paid on retirement or investment accounts. (iii) Engage in precautionary saving. (iv) Ensure that the value of assets is lower than the value of debt.

Correct AnswerverifiedShow Answer

Net wealth is:

Correct AnswerverifiedShow Answer

Precautionary savings are:

Correct AnswerverifiedShow Answer

What is your permanent income marginal propensity to consume (MPC) if your income permanently changes by $50,000 and your consumption increases by $45,000?

Correct AnswerverifiedShow Answer

The consumption function is a plot of the:

Correct AnswerverifiedShow Answer

The marginal propensity to consume is the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If income increases by $5 billion, and consumption increases by $4 billion, the marginal propensity to consume equals:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

If there is a temporary rise in income, a consumption smoother will exhibit _ in consumption, and a hand-to-mouth consumer will exhibit _ in consumption.

Correct Answer
verified

Correct Answer
verified

The consumption function can shift because of changes in _ and in _.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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