chapter 12.3

Question 1

The marginal propensity to consume is best defined as the amount of consumption expenditure in income.

true
false

Answer 1

true

Question 2

Government purchases equal $200 million, consumption is $300 million, net exports are $50 million, and investment is $100 million. What is the total expenditure for the economy?

$600 million
$700 million
$400 million
$550 million
$650 million

Answer 2

650 million

Question 3

According to the consumption function, as income increases, consumption

increases by a greater amount.

increases by a smaller amount.

decreases by a greater amount.

increases by the same amount.

decreases by a smaller amount.

Answer 3

increases by a smaller amount.

Question 4

The slope of the consumption function is equal to

the marginal propensity to consume.

the marginal propensity to save.

the relative price of consumption.

the real interest rate.

the nominal interest rate.

Answer 4

the marginal propensity to consume.

Question 5

Suppose consumption increases by $400 when income increases by $500. What is the marginal propensity to consume?

0.9
100
0.8
50
25

Answer 5

0.8