MODULE 16: Income and Expenditure

Printed Page 170(cont.)

Tackle the Test: Multiple-Choice Questions

Question
Changes in which of the following leads to a shift of the aggregate consumption function?
1. expected future disposable income
2. aggregate wealth
3. current disposable income
A.
I only
B.
II only
C.
III only
D.
I and II only
E.
I, II, and III
Changes in which of the following leads to a shift of the aggregate consumption function?
Question

The slope of a household’s consumption function is equal to
A.
the real interest rate.
B.
the inflation rate.
C.
the marginal propensity to consume.
D.
the rate of increase in household current disposable income.
E.
the tax rate.

The slope of a household’s consumption function is equal to
Question

Given the aggregate consumption function C = $1.6 trillion + 0.5Y_D, if aggregate current disposable income is $2.0 trillion, aggregate consumption spending will equal
A.
$3.6 trillion.
B.
$2.6 trillion.
C.
$2.0 trillion.
D.
$1.6 trillion.
E.
$0.6 trillion.

Given the aggregate consumption function
Question

The level of planned investment spending is negatively related to
A.
the rate of return on investment.
B.
the level of consumer spending.
C.
the level of actual investment spending.
D.
the interest rate.
E.
all of the above.

The level of planned investment spending is negatively related to
Question

Actual investment spending in any period is equal to
A.
planned investment spending + unplanned inventory investment.
B.
planned investment spending − unplanned inventory investment.
C.
planned investment spending + inventory decreases.
D.
unplanned inventory investment + inventory increases.
E.
unplanned inventory investment − inventory increases.

Actual investment spending in any period is equal to