SOLVED

8.1Â Â The Keynesian Theory of Consumption 1) The change in consumption divided by the change in income is equal to A) the MPC. B) the MPS. C) 1 – MPC. D) MPC + MPS. 2) The change in saving divided by the change in income is equal to A) the MPC. B) the MPS. C) 1 – MPS. D) MPC + MPS. 3) [Yd – C] equals A) spending. B) the MPC. C) saving. D) the MPS. 4) If the MPS is 0.10, MPC is A) 1.10. B) 1.00. C) 0.90. D) 0.80. 5) If you earn an additional $200 in disposable income one week for feeding your neighbors ferret, A) the total of your consumption and saving will increase by more than $200. B) the total of your consumption and saving will increase by $200. C) the total of your consumption and saving will increase by less than $200. D) your consumption will increase by more than $200, even if your MPS is 0.1. 6) If Earl received an $800 bonus and his MPS is 0.25, his consumption rises by $________ and his saving rises by $________. A) 825; 125 B) 600; 200 C) 400; 250 D) 800; 250 7) Uncertainty about the future is likely to A) decrease current spending. B) have no impact on current spending. C) increase current spending. D) either increase or decrease current spending. 8) Lower interest rates are likely to A) have no effect on consumer spending or saving. B) decrease consumer spending and increase consumer saving. C) decrease both consumer spending and consumer saving. D) increase consumer spending and decrease consumer saving. 9) Consumption is ________ related to household income and wealth and households’ expectations about the future, and ________ related to interest rates. A) positively; positively B) negatively; positively C) positively; negatively D) positively; is not 10) In a closed economy with no government, ________ is consumption plus investment. A) saving B) national income C) aggregate expenditures D) real spending