EC 302 Final Exam
When does the Keynesian theory of consumption NOT hold? - Answer-In the long run
Other things being equal, the Neoclassical model of investment predicts that net investment will
increase when the: - Answer-Depreciation rate falls
Which of the following is the weighted sum of the prices of a basket of domestically and foreign
produced goods? - Answer-CPI
In the ModiglianiLife-Cycle Theory, if the number of years to retirement increases, life resources
will_____________
and current consumption will ____________. - Answer-Increase; increase
5. The sum of wages and gross profits is defined as, - Answer-GDI (gross domestic income)
The measure of prices mostly used to announce inflation is the - Answer-CPI
n equilibrium, the real rental price of capital is equal to - Answer-Marginal Product of Capital
The marginal cost of capital is determined by all of the following EXCEPT - Answer-Corporate Profit Rate
The marginal cost of capital is determined by all of the following - Answer--Rate of depreciation
, -interest rate
-price of capital and its rate of change
When does the Keynesian theory of consumption hold - Answer--in cross sections
-in cyclical observations
Firms find it profitable to add to their capital stock if, - Answer-marginal product of capital exceeds the
real cost of capital
When the inflation rate is positive - Answer-nominal GDP grows more than real GDP
If the Keynesian consumption function is given by C = 150 + 0.80Y, and Y increases by 1 unit, then
savings; - Answer-increase by 0.20
As national income increases: - Answer-the average propensity to consume falls and gets nearer in value
to the marginal propensity to consume
13. Friedman's theory of consumption focuses on: - Answer-permanent income
The marginal propensity to consume is equal to: - Answer-change in consumption/ change in income
An increase in the marginal propensity to consume will: - Answer-lead to the consumption function
becoming steeper
Which of the following are characteristic of Friedman's 'Permanent Income Hypothesis'? - Answer-i) The
main influence on long-run consumption is some form of long-run average income
ii) Consumption will tend to be a constant proportion of long-run average income (permanent income)
When does the Keynesian theory of consumption NOT hold? - Answer-In the long run
Other things being equal, the Neoclassical model of investment predicts that net investment will
increase when the: - Answer-Depreciation rate falls
Which of the following is the weighted sum of the prices of a basket of domestically and foreign
produced goods? - Answer-CPI
In the ModiglianiLife-Cycle Theory, if the number of years to retirement increases, life resources
will_____________
and current consumption will ____________. - Answer-Increase; increase
5. The sum of wages and gross profits is defined as, - Answer-GDI (gross domestic income)
The measure of prices mostly used to announce inflation is the - Answer-CPI
n equilibrium, the real rental price of capital is equal to - Answer-Marginal Product of Capital
The marginal cost of capital is determined by all of the following EXCEPT - Answer-Corporate Profit Rate
The marginal cost of capital is determined by all of the following - Answer--Rate of depreciation
, -interest rate
-price of capital and its rate of change
When does the Keynesian theory of consumption hold - Answer--in cross sections
-in cyclical observations
Firms find it profitable to add to their capital stock if, - Answer-marginal product of capital exceeds the
real cost of capital
When the inflation rate is positive - Answer-nominal GDP grows more than real GDP
If the Keynesian consumption function is given by C = 150 + 0.80Y, and Y increases by 1 unit, then
savings; - Answer-increase by 0.20
As national income increases: - Answer-the average propensity to consume falls and gets nearer in value
to the marginal propensity to consume
13. Friedman's theory of consumption focuses on: - Answer-permanent income
The marginal propensity to consume is equal to: - Answer-change in consumption/ change in income
An increase in the marginal propensity to consume will: - Answer-lead to the consumption function
becoming steeper
Which of the following are characteristic of Friedman's 'Permanent Income Hypothesis'? - Answer-i) The
main influence on long-run consumption is some form of long-run average income
ii) Consumption will tend to be a constant proportion of long-run average income (permanent income)
