Question

Question 11

An increase in consumption might be caused by a(n):

Question 11 options:

A)	increase in income tax rates.

B)	recession.

C)	wealth effect of an increase in stock market prices.

D)	increase in saving.

Question 12

A decrease in consumption is caused by a(n):

Question 12 options:

A)	decrease in the real interest rate.

B)	decrase in taxes.

C)	anticipation of higher prices in the future.

D)	decrease in borrowing.

Question 13

Demand-pull inflation:

Question 13 options:

A)	occurs when prices of resources rise, pushing up costs and the price level.

B)	occurs only when the economy has reached its absolute production capacity.

C)	occurs when total spending exceeds the economy's ability to provide output at the existing price level.

D)	is also called cost-push inflation.

Question 14

If the Consumer Price Index rises from 300 to 333 in a particular year, the rate of inflation in that year is:

Question 14 options:

A)	91 percent.

B)	11 percent.

C)	33 percent.

D)	10 percent.

Question 15

Suppose a family's consumption exceeds its disposable income. This means that its:

Question 15 options:

A)	MPC is greater than 1.

B)	APC is greater than 1.

C)	APS is positive.

D)	MPS is negative.

Answer 1

11) Option C. Higher wealth accumulated will create a wealth effect and consumer will feel rich even when income is unchanged

12) Option D. When borrowing is reduced, it is natural that the consumption falls

13) Option C. This is basically the result of a tendency to buy more goods and services than what is available in the economy or what it is capable of producing.

14) Option .B Inflation rate is (333 - 300)*100/300 = 11%.

15) Option B. APC measures consumption income ratio so when consumption > income, APC is > 1.