Tag: concept of consumption function, saving function and investment function

Questions Related to concept of consumption function, saving function and investment function

The saving by individuals depends more or less upon ___________.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. ability (or power) to save

  2. willingness (or desire) to save

  3. opportunity to save

  4. all the above

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Correct Option: D

The rate of capital formation is the ratio between the gross capital formation and gross domestic product at current prices.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. True

  2. False

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Correct Option: A
Explanation:

The rate of capital formation is the ratio between (the increase in fixed capital and inventories) and (the total value of good produced and services provided in a country during one year).

An increase in income tax adversely affects the willingness to save.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. True

  2. False

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Correct Option: A
Explanation:

This statement is true as persons feel demotivated to work hard in order to earn more as because the real income after paying the increased income tax is much less despite the hard work of the individuals .Therefore the willingness to save is also less as the willingness to earn more is less.

The opportunity to save refers to the conditions of ___________.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. peace and security in the country

  2. favorable political inducement policy of the government to motivate people to save

  3. both A and B

  4. none of the above

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Correct Option: C
Explanation:

Peace and financial security in the economy is necessary to create an environment where the general public experiences an opportunity to save. Moreover, there is a need for favorable political inducement by the government through its policies to motivate people to save.

Which of the following is the suggestion to increase the rate of capital formation?

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. The taxation policy should be revised and adequate tax reliefs should be allowed to salaried persons and industrialists.

  2. Saving schemes like provident fund, compulsory insurance, compulsory deposits, etc., should be encouraged and extended.

  3. The law and order condition in every part of the country should be improved and security of life and property must be ensured

  4. All of these

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Correct Option: D

The process of capital formation occurs in three stages.

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. True

  2. False

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Correct Option: A
Explanation:
The 3 stages of capital formation are as follows;
1)creation of savings;increase in the volume of savings
2)mobilization of saving;credit and financial mechanism so that available savings are utilized by private and public sectors
3)investment of savings:the act of investment by which resources are used for production of capital goods.

Who create the savings from an economic point of view?

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. Individuals

  2. Banks

  3. Markets

  4. None of these

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Correct Option: A

"Larger the volume of saving, larger the size of capital, smaller the volume of saving, less is the size of capital." Who said this? 

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. Prof. Marshal

  2. Peterson

  3. Adam Smith

  4. Benham

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Correct Option: A
Explanation:

The economy falls into a growth cycle-more savings lead to more investment, thus large capital availability in an economy, which will further lead to the upliftment of an economy. Prof. Marshal remarked this thought.

In which countries the extensive use of machinery and tools has yielded higher production?

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. U.S.A.

  2. U.K.

  3. Japan

  4. All of these

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Correct Option: D

Which of the following are true or false?
a) Capital formation means the increase in the stock of real capital in a country 
b) Saving is not essential for capital formation

economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

  1. Both (a) and (b) are true

  2. (a) is true, but (b) is false

  3. (a) is false, but (b) is true

  4. Both (a) and (b) are false

Show answer
Correct Option: B
Explanation:
1)Capital formation refers to the net capital accumulation during an accounting period for a particular area.Thus 1st statement is true.
2)Savings is essential for capital formation as savings leads to investment in an economy which in turn leads to more capital formation.