According to consumption smoothing behaviour, which of the following is incorrect for the effects of an increase in future income? Savings increase. O Permanent income increases. O Future consumption increases. Savings decrease. Current consumption increases.
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- If you practice consumption smoothing, O you always spend less than you earn. there will be times in your life when it makes sense to borrow. O you make sure your current consumption matches your current income. O you do not save for the future.Figure 2 C3 C2 C1 45° Y2 Y1 Aggregate income Aggregate savingOne of these four answers best explains the effect of disposable income on consumption. Which one? O Disposable income does not determine consumption. O Disposable income is the most powerful determinant of income and determines how much an individual consumes. O When an individual has more disposable income, he or she is likely to consume less. O Disposable income is an important determinant of expected future income.
- hich theory of consumption best explains the consumption behavior of consumers of our economy? Question No: 02 [Marks: 10] If the State Bank started printing large quantities of Pakistani Rupees (Rs), what would happen to the number of Pakistani Rupees a dollar could buy? Why? Question No: 03 [Marks: 10] Deseribe the difference batuuean foreian diract investmet and foraion nortfolie invastment Who is mora likelu toWhich of the following is not a valid expenditure function? OU P.P, O UP, O None of these can be expenditure functions O (P. + P,) VŨ P+P1. The positive relationship between consumption expenditure and disposable income can be shown by a positive slope of consumption curve. Answer: Reason: O Accessibility: Investigate hp
- QUESTION 8 Consumption 0 45° O H CD+CF. A E Income C B F Refer to the given diagram. The marginal propensity to consume is equal to O AE+OE. O CF + CD. CB+ AB. Consumptionelaborate 3 determinants in which consumption can be increased according to the consumption functionWhich of the following would not increase consumption spending? O Decreased disposable income. Increased household wealth O A lower interest rate O Expectations of greater future income
- If a $5,000 increase in income leads to additional savings of $1,250, the marginal propensity to consume is 1.33 0.25 4 O 0.75Assume in a simple economy that thc level of saving is -500 when aggregate ourput equals zero and that the margina! propensity to save is 0.2. Derive the saving function and the consumption function, and draw a graph showing these func- tions. At what level of aggregate ouiput does the consumption curve cruss the 45° line? Explain your answer and show this un the graph.The table below provides Income and consumption Data in billions of dollars. Answer question below based on it.Disposable Consumption SavingsIncome100 80 --------200 150 --------- Using information from question 21, calculate the marginal propensity to consume for the economy? a. 0.8 b. 0.2 c. 0.3 d. 0.7