#1
1. In the context of macroeconomics, what is the definition of consumption?
The purchase of goods and services by households
ExplanationConsumption refers to household expenditure on goods and services.
#2
2. Which of the following factors is NOT typically considered as a determinant of consumption in macroeconomics?
Stock market performance
ExplanationStock market performance is not directly related to consumption decisions in macroeconomics.
#3
3. What is the term used to describe the portion of income that households do not consume but set aside for future use?
Savings
ExplanationSavings represent the portion of income not spent and reserved for future purposes.
#4
6. What is the relationship between the marginal propensity to consume (MPC) and the marginal propensity to save (MPS)?
MPC + MPS = 1
ExplanationThe sum of the marginal propensity to consume and the marginal propensity to save equals 1, reflecting the entire income.
#5
7. How does an increase in consumer confidence typically affect consumption in an economy?
Increases consumption
ExplanationHigher consumer confidence tends to lead to increased spending on goods and services.
#6
10. According to the Keynesian consumption function, what is the relationship between disposable income and consumption?
Consumption is directly proportional to disposable income
ExplanationIn the Keynesian consumption function, consumption increases linearly with disposable income.
#7
4. According to the permanent income hypothesis, what influences an individual's consumption decisions?
Both current and expected future income
ExplanationIndividuals base their consumption decisions on both current and anticipated future income levels.
#8
5. What is the paradox of thrift in the context of macroeconomics?
Increased savings can lead to a decrease in aggregate demand
ExplanationWhile saving is individually prudent, if everyone saves more, it can lead to reduced overall demand, potentially harming the economy.
#9
8. Which economic theory suggests that individuals base their consumption decisions on their relative income compared to others in society?
Relative income hypothesis
ExplanationThe relative income hypothesis posits that individuals' consumption decisions are influenced by their income relative to others in society.
#10
9. What role does the real interest rate play in the intertemporal consumption choice of individuals?
Higher real interest rates lead to lower consumption
ExplanationHigher real interest rates typically discourage borrowing and spending, leading to lower consumption.
#11
11. What is the Ricardian equivalence proposition in macroeconomics?
Changes in government debt do not affect consumption
ExplanationAccording to the Ricardian equivalence proposition, changes in government debt have no effect on consumption because individuals anticipate future taxes to offset government spending.