Consumption & Saving - IFY

Read to following extract from the BBC article.

 “The so-called "Bank of Mum and Dad" has continued to do brisk business in tough economic times. The report claimed that families were giving or loaning nearly £13,000 to children and grandchildren on average.” Then decide whether:

• Consumption in the UK is reducing

• Consumption in the UK is increasing

• Savings are increasing

• Banks are offering attractive rates on savings

Assume a state's aggregate household income is 10 billion with consumption of 9.6 billion. Calculate the average propensity to consume (APC).

• 0.96

• 96

• 1.04

• 10.4

If you added a country’s Average Propensity to Consume (APC) and its Average Propensity to Save (APS), you would get a sum of:

• < 1

• > 1

• 1

If the APC is 0.7 we save:

• 3% of our income

• 7% of our income

• 30% of our income

• 70% of our income

A man has a rise in his income from £26,000 to 28,000. As a result his spending rises from £24, 300 to £25,800. His MPC is…

• 0.2

• 0.6

• 0.75

• 1.33

Calculate the MPC based on the information provided on the chart below.

• 0.2

• 0.8

• $400

• $500

The table below shows the income levels and consumer spending within an economy. Calculate the APC when income is 600 Crores. Chose the correct answer:

• 0.95

• 0.85

• 0.83

• 0.8

Using data from the table calculate the MPC when income rises from 800 to 1000 Crores. Chose the correct answer:

• 0.95

• 0.85

• 0.83

• 0.8

Choose the correct formula:

• MPS = 1 + MPC

• MPC = 1+ MPS

• MPC – MPS = 1

• MPC + MPS = 1

Suppose an individual receives a £700 bonus with his pay check. If this individual decides to spend £490 of this marginal increase on a new business suit and save the remaining £210, his MPS is:

• 0.2

• 0.3

• 0.7

• 210