Question

Question 6

Which of the following is correct?

Question 6 options:

A)	APS + MPC = 1.

B)	APC + APS = 1.

C)	APC + MPS = 1.

D)	APS + MPS = 1.

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Question 7

The greater is the marginal propensity to consume, the:

Question 7 options:

A)	smaller is the average propensity to consume.

B)	higher is the interest rate.

C)	smaller is the marginal propensity to save.

D)	lower is the price level

Question 8

If the marginal propensity to consume is .9, then the marginal propensity to save must be:

Question 8 options:

A)

.1.

B)

.9.

C)

1.

D)

1.1.

Question 9

The most important determinant of consumer spending is:

Question 9 options:

A)	consumer expectations.

B)	the stock of wealth.

C)	the level of household borrowing.

D)	the level of income.

Question 10

Under which of the following circumstances would we observe the greatest increase in real income?

Question 10 options:

A)	Nominal income rises by 12 percent and the price level rises by 15 percent.

B)	Nominal income falls by 2 percent and the price level falls by 10 percent.

C)	Nominal income falls by 4 percent and the price level rises by 6 percent.

D)	Nominal income rises by 8 percent and the price level rises by 4 percent.

Answer 1

6)

APC + APS = 1

Because

APC = C/Y

APS = S/Y

APC + APS = C/Y + S/Y

= (C+S)/Y

= Y/Y

= 1

B is correct option

7)

WE HAVE

MPC + MPS = 1

MPS = 1 - MPC

As value of MPC increases then value of MPS falls  

so  The greater is the marginal propensity to consume, the smaller is the marginal propensity to save.

c is correct option

8) MPC = 0.9

MPS = 1 - MPC

= 1 - 0.9

= 0.1

So A is correct option

9 )

The most important part of consumer spending is the level of income

so D is correct option

10)

The greatest increase in real income when Nominal income rises by 8 percent and the price level rises by 4 percent.

so D is correct