Unit 5 - Practice Quiz

1 The functional relationship between aggregate consumption expenditure and aggregate income is known as:

2 In the linear consumption function , what does the coefficient '' represent?

3 What is the value of the Marginal Propensity to Consume (MPC) usually assumed to be in Keynesian economics?

4 The Marginal Propensity to Consume (MPC) is defined as:

5 If the Marginal Propensity to Consume (MPC) is 0.8, what is the Marginal Propensity to Save (MPS)?

6 The point at which the consumption curve intersects the 45-degree line (where ) is called the:

7 Which of the following is an objective factor determining consumption?

8 Investment that is independent of the level of income is known as:

9 The ratio of total consumption to total income at a specific level of income is called:

10 According to Keynes, as income increases, the Average Propensity to Consume (APC):

11 Gross Investment equals:

12 The 'Ratchet Effect' in consumption theory is associated with which hypothesis?

13 Investment that depends on the profit expectations resulting from changes in the level of income is called:

14 Which concept represents the expected rate of return on a new capital asset?

15 A business will invest in a new project if:

16 In the consumption equation , what is the value of the multiplier ()?

17 Which of the following is NOT a determinant of the Marginal Efficiency of Capital (MEC)?

18 The 'Demonstration Effect', where individuals mimic the consumption patterns of higher-income groups, was introduced by:

19 If the Average Propensity to Save (APS) is negative, this implies:

20 The summation of APC and APS always equals:

21 Which of the following describes the 'Supply Price' in the context of investment?

22 The Permanent Income Hypothesis was formulated by:

23 Technological advancement generally shifts the MEC curve to the:

24 Which form of investment adds to the real capital stock of the economy?

25 Which factor has an inverse relationship with investment?

26 If , the value of the investment multiplier is:

27 Which of the following is considered a 'leakage' from the circular flow of income?

28 The slope of the consumption function curve represents:

29 Inventory investment is defined as:

30 According to the Life Cycle Hypothesis, individuals plan their consumption and savings over their life to:

31 What is the relationship between taxes and the propensity to consume?

32 The 'Pigou Effect' relates changes in consumption to changes in:

33 If the consumption function is , what is the savings function?

34 Induced investment curve is:

35 Which of the following factors would likely DECREASE investment?

36 The distribution of income affects consumption. Generally, transferring income from the rich to the poor will:

37 Financial Investment implies:

38 Keynes termed the subjective factors influencing the consumption function as:

39 In the short run, the relationship between APC and MPC is typically:

40 Net Investment can be negative if:

41 Prospective Yield refers to:

42 If the consumption function is , and income () is 100, calculate total consumption.

43 Which economist highlighted the role of 'Animal Spirits' (spontaneous optimism) in investment decisions?

44 Autonomous consumption exists even when income is zero. How is this consumption financed?

45 What is the shape of the Keynesian Consumption Function curve?

46 The concept of 'MEI' stands for:

47 Investment is generally considered to be:

48 If the MPC is constant, the consumption function is:

49 Windfall gains (unexpected income) generally lead to:

50 In the equation , denotes: