Hw 4 Macro

The most important determinant of consumption and saving is the

• level of bank credit.

• level of income.

• interest rate.

• • price level.

  
  

The massive stimulus checks sent out by the U.S. government in 2020 in an attempt to fight off the economic effects of the pandemic

• generated a large increase in disposable income and saving.

• increased disposable income but reduced saving.

• • reduced disposable income but increased saving.

• • 
    

    decreased disposable income and saving.

If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to

• • 
    

    save is three-fifths.

• consume is one-half.

• consume is three-fifths.

• consume is two-fifths.

If the MPC is 0.8 and disposable income is $200, then

• • consumption and saving cannot be determined from the information given.

    Correct

• saving will be $20.

• personal consumption expenditures must be $160.

• • 
    

    saving will be $40.

  
  

In contrast to investment, consumption is

• • relatively unstable.

  
  

• relatively stable.

• measurable.

• • 
    

    unmeasurable.

Dissaving means

• that households are spending more than their current incomes.

• the same thing as disinvesting.

• • 
    

    that saving and investment are equal.

• that disposable income is less than zero.

Which of the following relations is not correct?

• 1 − MPC = MPS.

• APS + APC = 1.

• 
  

  MPS = MPC + 1.

• MPC + MPS = 1.

The greater is the marginal propensity to consume, the

• smaller is the marginal propensity to save.

• higher is the interest rate.

• smaller is the average propensity to consume.

• lower is the price level.

In the late 1990s, the U.S. stock market boomed, causing U.S. consumption to rise. Economists refer to this outcome as the

• Keynes effect.

• interest-rate effect.

• wealth effect.

• • multiplier effect.

Which of the following statements is not true about the wealth effect?

• • 
    

    The wealth effect is the tendency for people to increase their consumption spending when the value of their financial and real assets rises.

• The wealth effect is the tendency for people to decrease their consumption spending when the value of their financial and real assets falls.

• The amount of wealth owned by households can affect consumption but not saving.

• A strong “reverse wealth effect" occurred in 2008 when falling real estate and stock market prices joined to erase $11.2 trillion of household wealth.