Chapter 22 Preliminary Quiz
Consumption and Investment

Multiple Choice Questions:

Enter your answer to each of the questions in the blank to the left of the question. Be sure to use lowercase letters only!

1. Personal saving:
a. is that part of personal income that is not consumed.
b. equals income minus consumption.
c. both a and b.
d. neither a nor b.

2. Personal saving as a percent of disposable income is called:
a. inflation.
b. investment.
c. the personal saving rate.
d. none of the above.

3. The _______ shows the relationship between the level of consumption expenditures and the level of disposable personal income.
a. saving function
b. marginal propensity to consume
c. demand-for-investment schedule
d. consumption function.

4. The level of disposable income at which households just break even is found where:
a. investment and GDP are equal.
b. inflation is zero.
c. the consumption schedule intersects the 45 degree line from the origin.
d. none of the above.

5. The extra amount that people consume when they receive an extra dollar of disposable income is called the:
a. saving function.
b. marginal propensity to consume.
c. demand-for-investment schedule.
d. consumption function.

6. The marginal propensity to consume is:
a. the slope of the consumption function.
b. the slope of the investment function.
c. the slope of the saving function.
d. none of the above.

7. Which of the following is defined as the fraction of an extra dollar of disposable income that is saved?
a. saving function.
b. marginal propensity to consume.
c. marginal propensity to save.
d. consumption function.

8. Which of the following is correct?
a. MPS = 1 - MPC
b. MPS = MPC - CPI
c. MPC = 1 - MPS
d. both a and c

9. Which of the following assumes that people save in order to smooth their consumption over their lifetime?
a. the lifetime smoothing hypothesis.
b. the lifetime consumption hypothesis.
c. the life-cycle hypothesis.
d. the wealth effect.

10. Which of the following states that higher wealth leads to higher consumption?
a. the lifetime smoothing hypothesis.
b. the lifetime consumption hypothesis.
c. the life-cycle hypothesis.
d. the wealth effect.

11. I denotes:
a. personal investment.
b. gross private domestic investment.
c. inflation.
d. none of the above.

12. Which of the following is not a determinant of investment?
a. Demand for output produce by the new investment.
b. Interest rates and taxes that influence the costs of the investment.
c. Business expectations.
d. None of the above.

13. Which of the following is a primary cause of periods of recession and economic growth?
a. inflation
b. unemployment
c. investment fluctuations
d. none of the above

Chapter 22 Preliminary Quiz Consumption and Investment

Multiple Choice Questions:

1. Personal saving: a. is that part of personal income that is not consumed. b. equals income minus consumption. c. both a and b. d. neither a nor b.

2. Personal saving as a percent of disposable income is called: a. inflation. b. investment. c. the personal saving rate. d. none of the above.

3. The _______ shows the relationship between the level of consumption expenditures and the level of disposable personal income. a. saving function b. marginal propensity to consume c. demand-for-investment schedule d. consumption function.

4. The level of disposable income at which households just break even is found where: a. investment and GDP are equal. b. inflation is zero. c. the consumption schedule intersects the 45 degree line from the origin. d. none of the above.

5. The extra amount that people consume when they receive an extra dollar of disposable income is called the: a. saving function. b. marginal propensity to consume. c. demand-for-investment schedule. d. consumption function.

6. The marginal propensity to consume is: a. the slope of the consumption function. b. the slope of the investment function. c. the slope of the saving function. d. none of the above.

7. Which of the following is defined as the fraction of an extra dollar of disposable income that is saved? a. saving function. b. marginal propensity to consume. c. marginal propensity to save. d. consumption function.

8. Which of the following is correct? a. MPS = 1 - MPC b. MPS = MPC - CPI c. MPC = 1 - MPS d. both a and c

9. Which of the following assumes that people save in order to smooth their consumption over their lifetime? a. the lifetime smoothing hypothesis. b. the lifetime consumption hypothesis. c. the life-cycle hypothesis. d. the wealth effect.

10. Which of the following states that higher wealth leads to higher consumption? a. the lifetime smoothing hypothesis. b. the lifetime consumption hypothesis. c. the life-cycle hypothesis. d. the wealth effect.

11. I denotes: a. personal investment. b. gross private domestic investment. c. inflation. d. none of the above.

12. Which of the following is not a determinant of investment? a. Demand for output produce by the new investment. b. Interest rates and taxes that influence the costs of the investment. c. Business expectations. d. None of the above.

13. Which of the following is a primary cause of periods of recession and economic growth? a. inflation b. unemployment c. investment fluctuations d. none of the above

Chapter 22 Preliminary Quiz
Consumption and Investment

1. Personal saving:
a. is that part of personal income that is not consumed.
b. equals income minus consumption.
c. both a and b.
d. neither a nor b.

2. Personal saving as a percent of disposable income is called:
a. inflation.
b. investment.
c. the personal saving rate.
d. none of the above.

3. The _______ shows the relationship between the level of consumption expenditures and the level of disposable personal income.
a. saving function
b. marginal propensity to consume
c. demand-for-investment schedule
d. consumption function.

4. The level of disposable income at which households just break even is found where:
a. investment and GDP are equal.
b. inflation is zero.
c. the consumption schedule intersects the 45 degree line from the origin.
d. none of the above.

5. The extra amount that people consume when they receive an extra dollar of disposable income is called the:
a. saving function.
b. marginal propensity to consume.
c. demand-for-investment schedule.
d. consumption function.

6. The marginal propensity to consume is:
a. the slope of the consumption function.
b. the slope of the investment function.
c. the slope of the saving function.
d. none of the above.

7. Which of the following is defined as the fraction of an extra dollar of disposable income that is saved?
a. saving function.
b. marginal propensity to consume.
c. marginal propensity to save.
d. consumption function.

8. Which of the following is correct?
a. MPS = 1 - MPC
b. MPS = MPC - CPI
c. MPC = 1 - MPS
d. both a and c

9. Which of the following assumes that people save in order to smooth their consumption over their lifetime?
a. the lifetime smoothing hypothesis.
b. the lifetime consumption hypothesis.
c. the life-cycle hypothesis.
d. the wealth effect.

10. Which of the following states that higher wealth leads to higher consumption?
a. the lifetime smoothing hypothesis.
b. the lifetime consumption hypothesis.
c. the life-cycle hypothesis.
d. the wealth effect.

11. I denotes:
a. personal investment.
b. gross private domestic investment.
c. inflation.
d. none of the above.

12. Which of the following is not a determinant of investment?
a. Demand for output produce by the new investment.
b. Interest rates and taxes that influence the costs of the investment.
c. Business expectations.
d. None of the above.

13. Which of the following is a primary cause of periods of recession and economic growth?
a. inflation
b. unemployment
c. investment fluctuations
d. none of the above