#1
What is the multiplier effect in economics?
The effect of an initial change in spending on aggregate demand and thus on national income
ExplanationMultiplier effect refers to the impact of an initial spending change on overall demand and national income.
#2
Which of the following is NOT a component of consumption behavior?
Government expenditure
ExplanationGovernment expenditure is not a component of individual consumption behavior.
#3
What is the formula to calculate the marginal propensity to consume (MPC)?
Change in consumption / Change in disposable income
ExplanationMPC is calculated by dividing the change in consumption by the change in disposable income.
#4
In the Keynesian consumption function, what does 'autonomous consumption' refer to?
Consumption that remains constant regardless of income level
ExplanationAutonomous consumption is the portion that remains constant irrespective of changes in income.
#5
What is the paradox of thrift?
The idea that increased saving can lead to decreased aggregate demand and economic recession
ExplanationParadox of thrift suggests that higher saving can reduce overall demand, causing economic downturns.
#6
Which of the following is a factor that influences the consumption function?
Taxation policy
ExplanationTaxation policy is a factor influencing the components of the consumption function.
#7
What is the role of consumer expectations in the consumption function?
Consumer expectations influence consumption decisions, affecting future income expectations
ExplanationConsumer expectations shape consumption choices, impacting future income expectations.
#8
What is the 'accelerator effect' in economics?
The change in investment due to changes in the rate of change of national income
ExplanationAccelerator effect relates to investment changes resulting from variations in the rate of national income change.
#9
What is the formula to calculate the marginal propensity to save (MPS)?
Change in saving / Change in disposable income
ExplanationMPS is calculated by dividing the change in saving by the change in disposable income.
#10
In the context of the multiplier effect, what does the term 'leakage' refer to?
The fraction of income not spent on domestically produced goods and services
ExplanationLeakage is the portion of income not spent on domestically produced goods and services.
#11
What role does the marginal propensity to consume (MPC) play in the multiplier effect?
Higher MPC leads to a larger multiplier effect.
ExplanationA higher MPC results in a more significant multiplier effect in the economy.
#12
What is the 'paradox of toil'?
The idea that increased effort can lead to decreased productivity and economic inefficiency.
ExplanationParadox of toil posits that increased effort may reduce productivity and cause economic inefficiency.