Chapter 5 - The Household-Consumption Sector

1			Today Americans spend _______ of their disposable incomes
			A)	about half
			B)	about three-quarters
			C)	about nine-tenths
			D)	all
2			If you added a country's average propensity to consume and its average propensity to save you would get a sum of
			A)	less than 1.
			B)	more than 1.
			C)	1.
3			As a country's marginal propensity to consume goes down, its marginal propensity to save
			A)	also goes down.
			B)	stays the same.
			C)	goes up.
4			Consumption is a function of
			A)	saving.
			B)	disposable income.
			C)	consumption.
			D)	taxation.
5			When disposable income rises,
			A)	induced consumption rises.
			B)	autonomous consumption rises.
			C)	induced consumption and autonomous consumption both rise.
			D)	neither induced consumption nor autonomous consumption rise.
6			Which statement is true?
			A)	Consumers spend a greater percentage of their disposable incomes on consumer durables than they did 50 years ago.
			B)	Consumers spend more on services than they do on durables and nondurables combined.
			C)	In recent years, consumers have spent a declining percentage of their incomes on services.
			D)	During a recession, spending on services falls much more sharply than spending on durables.
7			The level of consumption tends to rise as the stock of liquid assets in the hands of consumers goes _____ and as the stock of durable goods in the hands of consumers goes ______.
			A)	up, up
			B)	down, down
			C)	up, down
			D)	down, up
8			Among the leading industrial nations, the United States savings rate would rank
			A)	at the top.
			B)	near the top.
			C)	in the middle.
			D)	at or near the bottom.
9			Conspicuous consumption
			A)	was a phrase coined by Thorstein Veblen.
			B)	is what is meant by the phrase "keeping up with the Joneses."
			C)	is a way the wealthy, among others, advertise their wealth.
			D)	was written about in The Theory of the Leisure Class.
			E)	all of the above
10			Since the early 1980s our APS has
			A)	increased substantially.
			B)	increased slightly.
			C)	stayed about the same.
			D)	decreased slightly.
			E)	decreased substantially.
11			If the APC is .8, we save
			A)	2 percent of our income.
			B)	8 percent of our income.
			C)	20 percent of our income.
			D)	80 percent of our income.
12			Milton Friedman's "permanent income hypothesis"
			A)	is borne out by the consumption patterns of lottery winners.
			B)	states that consumption depends on our expected income stream over time.
			C)	is the consumption function.
			D)	has no validity.
13			Which statement is false?
			A)	Our savings rate may not have been so low were it not for Social Security.
			B)	Widespread home ownership has lowered our savings rate.
			C)	The availability of home equity loans has reduced our savings rate.
			D)	None is false.
14			Autonomous consumption is______ zero.
			A)	always
			B)	usually
			C)	sometimes
			D)	never
15			When the APS is negative, the APC is
			A)	negative.
			B)	less than 1.
			C)	1.
			D)	more than 1.