Test #5 Chapter 6

Answer the questions below and then click "submit" to send your answers.

  1. Keynes suggested that poor people consume a higher percentage of their income than the rich.

    2. Your answer:
    True False

  2. The marginal propensity to consume rises as the absolute level of income increases.

    3. Your answer:
    True False

  3. If the MPC is 0.6, then the MPS must be 0.4 for Macroland.

    4. Your answer:
    True False

  4. If Macroland’s MPC is 0.8, then we know MPS = 1.8 from the relation MPS = 1 + MPC.

    5. Your answer:
    True False

  5. According to James Duesenberry, knowing someone’s absolute income tells us everything about that person’s income status.

    6. Your answer:
    True False

  6. According to Milton Friedman, how much we spend on consumption depends strictly on our permanent income.

    7. Your answer:
    True False

  7. The rate of capacity utilization is a principal determinant of autonomous investment.

    8. Your answer:
    True False

  8. For producers, there is a cost to having flexibility. Carrying excess productive capacity can be an expensive way of overcoming short-run production bottlenecks.

    9. Your answer:
    True False

  9. Unlike consumption, which is fairly stable over time, investment is subject to erratic fluctuations even through very short periods of time.

    10. Your answer:
    True False

  10. The consumption function shows the relationship between consumption and saving.

    11. Your answer:
    True False

  11. The marginal propensity to consume is the ratio of a change in consumption to a change in income.

    12. Your answer:
    True False

  12. According to Keynes, the marginal propensity to consume is constant when income increases.

    13. Your answer:
    True False

  13. When investment is autonomous, it is independent of the level of national income.

    14. Your answer:
    True False

  14. The relationship between changes in interest rates and changes in the level of investment is depicted by the downward-sloping investment curve.

    15. Your answer:
    True False

  15. Production and consumption decisions are dependent on each other.

    16. Your answer:
    True False

  16. The consumption function is the relation between consumption and production.

    17. Your answer:
    True False

  17. Kuznet’s research showed that the marginal propensity to consume remains constant as national income rises.

    18. Your answer:
    True False

  18. Investment is a positive function of the national income level.

    19. Your answer:
    True False

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