Consumption Function Quiz

What does the consumption function represent?

• The relationship between income and saving

• The relationship between consumption and income

• The relationship between interest rates and inflation

• The relationship between investment and government spending

Who introduced the concept of the consumption function?

• Karl Marx

• John Maynard Keynes

• Adam Smith

• Milton Friedman

Which of the following is the general form of the consumption function?

• C = a + bY

• C = a - bY

• C = a × bY

• C = a ÷ bY

In the Keynesian consumption function, what does 'a' represent?

• Autonomous consumption

• Marginal propensity to consume (MPC)

• National income

• Disposable income

If income increases, what generally happens to consumption?

• It decreases

• It remains the same

• It increases

• It becomes zero

What is the Marginal Propensity to Consume (MPC)?

• The additional saving when income increases

• The additional consumption when income increases

• The total consumption in an economy

• The proportion of income spent on luxury goods

Which of the following statements about the MPC is true?

• MPC is always greater than 1

• MPC is always negative

• MPC is between 0 and 1

• MPC is equal to 0

What happens to savings when the MPC is high?

• Savings increase

• Savings decrease

• Savings remain constant

• Savings become negative

What is the Marginal Propensity to Save (MPS)?

• The fraction of additional income saved

• The total income in an economy

• The increase in total savings

• The difference between consumption and saving

If the MPC is 0.8, what is the MPS?

• 0.2

• 0.8

• 1.0

• 1.2