Economics Quiz on Consumption and Investment Functions

What does the consumption function describe?

• The relationship between savings and inflation

• The relationship between government spending and economic growth

• The relationship between investment and interest rates

• The relationship between a household's consumption and its disposable income

Who introduced the concept of the consumption function?

• Milton Friedman

• Edward Prescott

• Ludwig von Mises

• John Maynard Keynes

What is the primary factor that affects consumption according to the text?

• Technological advancements

• Interest rates

• Government policies

• Wealth

What type of investment is driven by changes in aggregate demand?

• Induced Investment

• Autonomous Investment

• Foreign Investment

• Government Investment

What does the marginal efficiency of capital (MEC) reflect?

• The level of consumer spending

• The total output of an economy

• The cost of borrowing

• The expected rate of return on additional investment

Which of the following is NOT a determinant of investment?

• Interest Rates

• Consumer Preferences

• Inflation Rates

• Government Policies

What does the multiplier effect measure?

• The impact of interest rates on investment

• The fluctuations in business cycles

• The relationship between consumption and savings

• The effect of a change in autonomous spending on total output

What phase of the business cycle is characterized by rising economic activity?

• Trough

• Contraction

• Expansion

• Peak

Which theory suggests that business cycles result from fluctuations in aggregate demand?

• Austrian Theory

• Monetarist Theory

• Keynesian Theory

• Real Business Cycle Theory

What is the primary focus of the Austrian Theory of business cycles?

• Changes in the money supply

• Government intervention

• Misallocation of resources due to low interest rates

• Technological shocks