Consumption, Saving & Investment Quiz

What role do consumption, saving, and investment play in a nation’s economic performance?

What happens to nations that save and invest large fractions of their incomes?

What is the largest single component of GDP?

What are the major elements of personal consumption expenditure?

What is the relationship between income and consumption?

What is the break-even point in terms of household income?

What does the marginal propensity to consume (MPC) represent?

How much does consumption rise? Consumptions grows from $25,000 to $25,800, an increase of $800. The extra consumption is therefore 0.80 of the extra income.

Why are MPC and MPS related like mirror image? Disposable income equals consumption plus savings. Thus, if MPC is 0.80, then MPS must be 0.20. MPS + MPC = 1, always and every where.

Why are we interested in national consumption? Consumption behaviour is crucial for understanding both short term business cycles and long term economic growth.