Consumption Function

The average propensity to consume is measured by:

• C/Y

• C * Y

• Y/C

• C+Y

An increase in the marginal propensity to consume will:

• Lead to the consumption function becoming steeper

• Shift the consumption function upwards

• Shift the consumption function downwards

• Shift the savings function upwards

If the Keynesian consumption function is C = 10 + 0.8 Yd then, if disposable income is Rs. 1000, what is amount of total consumption?

• Rs. 0.8

• Rs. 800

• Rs. 810

• Rs. 0.81

If the Keynesian consumption function is C = 10 + 0.8 Yd then, when disposable income is Rs. 1000, what is the marginal propensity to consume?

• 0.8

• 800

• 810

• 0.81

If the Keynesian consumption function is C = 10 + 0.8 Yd then, when disposable income is Rs. 1000, what is the average propensity to consume?

• 0.8

• Rs. 800

• Rs. 810

• 0.81

As national income increases:

• The average propensity to consume falls and gets nearer in value to the marginal propensity to consume

• The average propensity to consume increases and diverges in value from the marginal propensity to consume

• The average propensity to consume stays constant

• The average propensity to consume always approaches infinity

An increase in consumption at any given level of income is likely to lead to:

• Higher aggregate demand

• An increase in exports

• A fall in taxation revenue

• A decrease in import spending

Lower interest rates are likely to:

• Decrease consumption

• Increase cost of borrowing

• Encourage saving

• Increase borrowing and spending

The marginal propensity to consume is equal to:

• Total spending / total consumption

• Total consumption / total income

• Change in consumption / change in income

• Change in consumption / change in savings

Which of the following are characteristics of the ‘Keynesian Consumption Function’?

• The main influence on consumption in the short-run is current disposable income

• The marginal propensity to consume (mpc) is greater than one

• The marginal propensity to consume (mpc) is less than one

• The average propensity to consumer (apc) will tend to fall as income increases

• The average propensity to consume (apc) will tend to rise as income increases