Question

Practice Questions (Chapter 8 (Note: In order to provide some incentives, your scores will be recorded and the top 20% scorers of practice questions at the end of the semester will receive some extra credit.) 1. Aggregate consumption will certainly increase if a) income increases and wealth decreases. b) income increases and interest rates decrease. c) interest rates increase and household wealth decreases. d) interest rates increase and consumer confidence about the future strengthens. 2. The MPC is a) the change in consumption divided by the change in income. b) consumption divided by income. c) the change in consumption divided by the change in saving. d) the change in saving divided by the change in income. e none of the above. 3. In a closed economy with no government, aggregate expenditure is a) b) consumption plus investment. saving plus investment. c) consumption plus the MPC. 4. When the MPC is 0.75, MPS is a) 4.00. b) 3.00. c) 0.75. d) e) 0.25. none of the above. 5. If the consumption function is of the form C = 80 + 0.4%, the MPC equals a) -0.4. b) 0.4. c) 0.6. d) 0.6. e) none of the above. 6. Investment refers to a) b) c) d) e) the purchase of new stock in a company. the purchase of new or existing stock in a company. the creation of capital stock. the stock of accumulated saving. all of the above. 7. In macroeconomics, equilibrium is defined as that point at which a) saving equals consumption. b) planned aggregate expenditure equals aggregate output. c) planned aggregate expenditure equals consumption. d) aggregate output equals consumption minus investment

Answer 1

1.

income increases and interest rates decrease.

because higher income and lower interest rates both are positive for consumption spending.

2.

the change in consumption divided by the change in income.

as consumption responses to the change in income.

3.

consumption plus investment.

4.

MPS=1-MPC=1-0.25

So 0.25 is answer

the above are answers

we do only first four questions based on Chegg rule.