Question

1. Which of the following statements are correct?

a. Economic growth and unemployment are areas on which macroeconomics focus in contrast with the aggregate output level and employment level on which microeconomics focus.

b. An increase in nominal GDP can be the result of an increase in the quantity produced of goods and services and/or an increase in the prices of goods and services produced.

c. Stabilisation policies refer to fiscal policy and monetary policy.

d. An increase of 20% in the price of lamb meat is an example of inflation.

e. If the population in South Africa grows at 5% per year and the economic growth rate is 3% per year, a decline in the real GDP per capita occurs.

1. a,bandc

2. Only b, c and d

3. b,c,d and e

4. Onlybandc

5. Only b, c and e

2.Referring specifically to the consumption function C = c0 + cY, if a positive relationship exists between income (Y) and consumption (C), it means that ...

1. An increase in consumption spending will increase income.

2. An increase in consumption spending will decrease income.

3. An increase in income will increase consumption spending.

4. An increase in income will decrease consumption spending.

3. Which of the following is true in terms of consumer spending?

a. An increase in the marginal propensity to consume will change the vertical intercept of the consumption function

b. Autonomous consumption decreases if the availability of credit decreases.

c. The equilibrium level of income will decrease if the marginal propensity to save decreases.

1. a,b and c

2. Only a and b

3. Only a and c

4. Only b and c

5. None of the options 1 to 4 is correct

4. Consider the consumption function of country A: Country A: C = 2 000 + 0.7YD Which of the following statements concerning the consumption function are correct?

a. The value of autonomous consumption is equal to 2 000.

b. If autonomous consumption increases the marginal propensity to consume will increase.

c. The value 0.7 represents the marginal propensity to consume which means that 70 cents out of each rand of disposable income is spent on consumption.

d. Assume that the level of disposable income increases from R5 000 to R6 000, then consumption spending will change from R5 500 to R6 200.

1. a,b,c and d

2. Only a and b

3. Only a and d

4. Only a, c and d

5. Only b, c and d

5.Which of the following statements concerning the consumption function are correct?

1. The value of autonomous consumption is equal to 1 000.

2. If autonomous consumption increases the marginal propensity to consume will increase.

3. The value 0.9 in the equation represents the marginal propensity to consume which means

   that 90 cents out of each rand of disposable income is spent on consumption.

4. The value of 0.9 in the equation represents the slope of the consumption curve.

5. If the value of R1 000 increases to R2 000 the consumption function will shift upwards.

   1. a,b,c,dand e

   2. Onlya,b,dande

   3. Only b, c and d

   4. Onlya,c,dande

   5. Only a, c and e

Answer 1

1)3.b,c,d,e

a is false since all of the metrics mentioned in the statement are focused upon in the field of macroeconomics.

2)3. An increase in income will increase consumption spending.

Since consumption is a function of income and the relation is positive, an increase in income will increase consumption spending.

3)2. Only a and b

c is false since the equilibrium level of income does not depend on saving since saving is a function of income and not the other way around.

4)Equation is missing