1|Page
EC250 Final Exam|| Exam With Complete Questions
And Correct Answers| NEWEST UPDATE!!!!
49. According to the Keynesian theory of consumption
a) Consumption does not depend on wealth
b) Consumption does not depend on future income
c) Consumption depends only on current disposable
income
d) All of the above - ANSWER-d) All of the above
50. According to theory we discussed in class
a) Consumption depends on current disposable income
b) the MPC depends on whether the change in income is
temporary or permanent
c) Consumption depends on the present value of
disposable future income
d) All of the above - ANSWER-d) All of the above
51. Marginal Propensity to Consume
a) increases when the nominal interest rate rises
,2|Page
b) depends on the nominal interest rate
c) depends on the rate of inflation
d) depends on whether the change in income is temporary
or permanent - ANSWER-d) depends on whether the
change in income is temporary or permanent
52. About the utility of consumption we assume that
a) it is always increasing
b) marginal utility of consumption is positive
c) marginal utility of consumption is decreasing
d) all of the above - ANSWER-d) all of the above
53. You won a scholarship that will pay $10 000 in a year
(when you finish the first term of year 3) and another $10
000 in two years (when you finish the first term of year 4).
The present value today of the scholarship is:
a) $20 000
b) $10 000+$10 000/(1+i)
c) $10 000+$10 000/(1+r)
d) $10 000/(1+r) + $10 000/(1+r)^2 - ANSWER-d) $10
000/(1+r) + $10 000/(1+r)^2
,3|Page
54. Jill, who is 22, has an inheritance fund that will pay her
a substantial amount each year after she turns 25.
Assume that she is not liquidity-constrained. This means
that, in the year she starts receiving the inheritance, her
consumption
a) will not change
b) will rise a little
c) will rise by the amount of extra income
d) will rise more than the extra income - ANSWER-a) will
not change
55. The marginal propensity to consume
a) is between 0 and 1
b) cannot be negative
c) cannot be greater than one
d) can be greater than one if income rises and is expected
to rise even more in the future - ANSWER-d) can be
greater than one if income rises and is expected to rise
even more in the future
, 4|Page
56. When the real interest rate increases
a) the change in current consumption depends on the
strength of substitution and wealth effects
b) current consumption rises if the wealth effect is weaker
than the substitution effect
c) current consumption falls, as households increase
savings
d) none of the above - ANSWER-a) the change in current
consumption depends on the strength of substitution and
wealth effects
57. The life-cycle theory of consumption, without liquidity
constraints, implies that
a) the main reason for saving is retirement
b) as income increases over time, savings increase
c) if r=ρ, once a person starts working, she tries to
maintain constant consumption over time
d) all of the above - ANSWER-d) all of the above
58. An increase in the real interest rate
EC250 Final Exam|| Exam With Complete Questions
And Correct Answers| NEWEST UPDATE!!!!
49. According to the Keynesian theory of consumption
a) Consumption does not depend on wealth
b) Consumption does not depend on future income
c) Consumption depends only on current disposable
income
d) All of the above - ANSWER-d) All of the above
50. According to theory we discussed in class
a) Consumption depends on current disposable income
b) the MPC depends on whether the change in income is
temporary or permanent
c) Consumption depends on the present value of
disposable future income
d) All of the above - ANSWER-d) All of the above
51. Marginal Propensity to Consume
a) increases when the nominal interest rate rises
,2|Page
b) depends on the nominal interest rate
c) depends on the rate of inflation
d) depends on whether the change in income is temporary
or permanent - ANSWER-d) depends on whether the
change in income is temporary or permanent
52. About the utility of consumption we assume that
a) it is always increasing
b) marginal utility of consumption is positive
c) marginal utility of consumption is decreasing
d) all of the above - ANSWER-d) all of the above
53. You won a scholarship that will pay $10 000 in a year
(when you finish the first term of year 3) and another $10
000 in two years (when you finish the first term of year 4).
The present value today of the scholarship is:
a) $20 000
b) $10 000+$10 000/(1+i)
c) $10 000+$10 000/(1+r)
d) $10 000/(1+r) + $10 000/(1+r)^2 - ANSWER-d) $10
000/(1+r) + $10 000/(1+r)^2
,3|Page
54. Jill, who is 22, has an inheritance fund that will pay her
a substantial amount each year after she turns 25.
Assume that she is not liquidity-constrained. This means
that, in the year she starts receiving the inheritance, her
consumption
a) will not change
b) will rise a little
c) will rise by the amount of extra income
d) will rise more than the extra income - ANSWER-a) will
not change
55. The marginal propensity to consume
a) is between 0 and 1
b) cannot be negative
c) cannot be greater than one
d) can be greater than one if income rises and is expected
to rise even more in the future - ANSWER-d) can be
greater than one if income rises and is expected to rise
even more in the future
, 4|Page
56. When the real interest rate increases
a) the change in current consumption depends on the
strength of substitution and wealth effects
b) current consumption rises if the wealth effect is weaker
than the substitution effect
c) current consumption falls, as households increase
savings
d) none of the above - ANSWER-a) the change in current
consumption depends on the strength of substitution and
wealth effects
57. The life-cycle theory of consumption, without liquidity
constraints, implies that
a) the main reason for saving is retirement
b) as income increases over time, savings increase
c) if r=ρ, once a person starts working, she tries to
maintain constant consumption over time
d) all of the above - ANSWER-d) all of the above
58. An increase in the real interest rate
