IGCSE Economics _ Households

Identify the likely consequence of an increase in the rate of interest.

• Consumers will spend more.

• Businesses will invest less in capital goods such as equipment and machinery.

• Households will save less as they will earn lower rewards.

• Households will increase their cash holdings.

The table shows how Althea, Alex and Ashish spend their income. What is the most likely order of earnings for Althea, Alex and Ashish (from the highest income to the lowest income)?

• Althea - Alex - Ashish

• Althea - Ashish - Alex

• Ashish - Alex - Althea

• Alex - Althea - Ashish

A supermarket cashier is willing to work longer hours if her wage rate increases. There reaches a point when she prefers leisure to work. From the supply curves for labour below, which curve represents this situation?

• W

• X

• Y

• Z

Which statement about spending and saving is false?

• If people have no income, they cannot consume.

• If people have earnings, they may be able to save.

• The interest rate affects saving and borrowing.

• Confidence affects saving and borrowing.

Which changes are most likely going to increase levels of saving?

• Lower interest rate and higher wealth tax

• Better financial institutions and retiring from work

• Social attitudes that saving is good and a low interest rate

• Higher interest rate and lower wealth tax

A pilot earns $50 000 a year, she pays a 20% income tax and we know she always spends $6000 on food and rent per year. The pilot has a savings ratio of 50% of disposable income. What is the amount saved by the pilot?

• $20 000

• $21 000

• $25 000

• $17 000

What would make people save less?

• A decrease in interest rate

• An increase in income

• Worry about losing their job in the future

• A decrease in income tax

Which statement about income and spending is correct?

• Higher income usually makes you spend relatively less and save more.

• Poor people spend more money on food than those with higher incomes.

• Young people save more than middle-aged people.

• Disposable income is income after savings.

Which will NOT increase the tendency to borrow?

• A lower interest rate

• Confidence in a strong economy

• Easy access credit cards and 'pay half now, half next year' offers

• A higher interest rate

People with low incomes may have negative savings. What does this statement mean?

• Negative interest rate results in having to pay for savings

• They are using past savings or are borrowing

• These people have to save but do not want to

• They saved more than they earned