Tag: concept of consumption function, saving function and investment function
Questions Related to concept of consumption function, saving function and investment function
Which of the following factors don't affect the propensity to consume in an economy?
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Rate of interest
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Wealth
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Taxes
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Consumer credit
The factors that influence consumption and savings behaviour in the economy are as follows:
Rate of interest: Commercial bank offer a certain rate of interest on the deposits held by public and charges rate of interest on the loans given to public. When people do not want to purchase goods and services, they keep their money in the bank to earn the rate of interest. But when they want to buy goods and services, they withdraw money from the bank and lose interest in the process. In this way, the rate of interest plays an important role in influencing a persons decision to consume.
Wealth: Propensity to consume is influenced by a persons holding of wealth. People who have wealth in the form of gold, jewellery, ownership of land and building, shares and bonds etc enjoy a higher level of income generated from the wealth. Accordingly, their consumption level will be higher.
Consumer credit: Availability of consumer credit influences consumption behaviour to a large extent in the economy. There are many durable goods which consumers want to buy. But due to lack of credit facility, they are not able to buy them as they are costly items.
The Consumption Function shows the _____________ .
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relationship between consumption and income.
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relationship between investment and saving.
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relationship between consumption and saving.
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relationship between income and saving.
The Consumption Function describes the functional relationship between Consumption and Income.
In dealing with Propensity to consume, Keynes considered two attributes:
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APC and MPC
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APS AND MPS
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Demand and Supply
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Income and consumption
In dealing with Propensity to consume, Keynes considered two attributes:
A schedule of the propensity to consume is ________________.
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A statement showing the functional relationship between the level of aggregate consumption and aggregate income at each level of income.
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A statement showing the functional relationship between the level of consumption and savings at each level of income.
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A statement showing the functional relationship between the level of aggregate consumption and investment at each level of income.
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none of the above
A schedule of propensity to consume refers to a statement that shows the functional relationship between the level of aggregate consumption and aggregate income in the economy at each level of output produced.
$APC=\dfrac{C}{Y}$
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True
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False
True.
Calculate APC:
If Y=$3,000$ and C=$2,600$.
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0.86
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0.80
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0.79
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1.5
Psychological law of consumption states that "as income goes on increasing, the consumption also increases but at a rate less than increase in income.
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True
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False
True.
The Average Propensity to Consume is denoted as _____________.
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$APC=\dfrac{C}{I}$
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$APC=\dfrac{S}{Y}$
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$APC=\dfrac{I}{Y}$
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$APC=\dfrac{C}{Y}$
_______________ explains the relationship between Consumption (C) and Income (Y) in terms of the psychological law of consumption.
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Alfred Marshall
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J.M. Keynes
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Adam Smith
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Lionel Robbins
J.M Keynes explained the relationship between Consumption(C) and Income(Y) through the psychological law of consumption that stated, "as income goes on increasing, the consumption also increases but at a rate less than increase in income because there is always a part of income which is saved for future uncertainties".
___________________ is consumption at zero level of income.
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Direct consumption
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Autonomous consumption
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Indirect consumption
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Induced consumption
Autonomous consumption refers to that consumption which occurs when there is no income in the economy. It is the minimum level of consumption that takes place in the economy due to the requirement of the basic needs of life.