- If income increases, Keynesian theory suggests that total consumption will:
- Remain constant
- Increase, but by less than the increase in income
- Decrease
- Increase by the same amount as income
- Autonomous consumption refers to consumption that:
- Depends on investment
- Does not depend on income
- Depends only on income
- Depends on interest rates
- Actual investment differs from planned investment when:
- There is no change in inventories
- Government spending decreases
- There are unexpected changes in inventories
- Businesses accurately forecast future demand
- In a simple economy, planned investment refers to:
- The total spending by firms on capital goods and inventories
- Government expenditure on public projects
- The actual level of investment that occurs in an economy
- The level of investment firms intend to undertake
- In the Keynesian model, planned investment is determined mainly by:
- Government spending
- The money supply
- The current account balance
- Interest rates and business expectations
- If businesses sell more than they expected, their actual investment will be:
- Less than planned investment
- More than planned investment
- Unaffected
- Equal to planned investment
- If the marginal propensity to consume (MPC) is 0.6, what is the marginal propensity to save (MPS)?
- If consumption exceeds income in a given period, it means that:
- Investment is decreasing
- People are borrowing or using past savings
- The MPC is greater than 1
- There is a budget surplus
- The average propensity to consume (APC) is defined as:
- According to Keynes, the most important determinant of consumption is:
- Expectations about future inflation
- Interest rates
- Disposable income
- Government spending