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

Quizzes (4) Questions (169)

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

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

The saving by individuals depends more or less upon ___________.

  1. ability (or power) to save

  2. willingness (or desire) to save

  3. opportunity to save

  4. all the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Individual saving is influenced by the ability to save (income level), the willingness to save (psychological factors), and the opportunity to save (availability of banking or investment channels). Therefore, all these factors contribute to the total saving.

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

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

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
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).

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

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

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
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.

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

The opportunity to save refers to the conditions of ___________.

  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
Reveal answer Fill a bubble to check yourself
C Correct answer
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.

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

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

  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
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Capital formation requires incentivizing savings and ensuring a stable environment for investment. Tax reliefs, structured saving schemes, and a secure legal environment all promote the accumulation of capital.

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

The process of capital formation occurs in three stages.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
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.
Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Who create the savings from an economic point of view?

  1. Individuals

  2. Banks

  3. Markets

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

From an economic perspective, savings are the portion of income not consumed by individuals. While banks and markets facilitate the process, the act of saving originates with the individual.

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

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

  1. Prof. Marshal

  2. Peterson

  3. Adam Smith

  4. Benham
Reveal answer Fill a bubble to check yourself
A Correct answer
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.

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

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

  1. U.S.A.

  2. U.K.

  3. Japan

  4. All of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Developed nations like the U.S.A., U.K., and Japan have historically relied on advanced machinery and technology to achieve high levels of industrial production and economic growth.

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

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

  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
Reveal answer Fill a bubble to check yourself
B Correct answer
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.