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Decision Makers Household Sector
Decision Makers Household Sector MCQs
?
If an individual earns $60,000 this year and $60,000 the following year, the real interest rate is 5%, the present value of income will be
$123,000
$120,000
$117,142
$115,234
?
If the individual in 1) decides to consume $40,000 this year, how much can he consume in year 2?
$81,000
$80,000
$20,000
$21,000
?
If the same consumer decides to consume $80,000 in year 1 by borrowing the additional $20,000, how much can he consume in year 2?
$39,000
$40,000
$60,000
$38,000
?
In the Fisher diagram, the slope of the budget constraint line is expressed algebraically by
the real interest rate.
the nominal interest rate.
(1 + Real interest rate).
-(1 + Real interest rate).
?
The higher the real interest rate is
the steeper the budget constraint.
the flatter the budget constraint.
the steeper the indifference curve.
the flatter the indifference curve.
?
As you move from right to left along the indifference curve, an individual’s total utility
decreases at a constant rate.
decreases at an increasing rate.
remains constant.
increases
?
The indifference curve of the saver is
flatter than that for the borrower.
steeper than that for the borrower.
the same as the borrower.
is perfectly elastic.
?
The saver discounts the future more heavily than the borrower.
True
False
?
If a rise in real interest rates causes a fall in the following period level of consumption, the individual must be
a borrower.
a lender.
neither a lender nor a borrower.
must be a saver in the current period.
?
An increase in income is reflected in the Fisher diagram and has the effect of
a rightward shift in the budget constraint and lowering consumption in period one only.
a rightward shift in the budget constraint and lowering consumption in period two only.
a rightward shift in the budget constraint and increasing consumption in period one only.
a rightward shift in the budget constraint and increasing consumption in both periods.
?
A person with a liquidity constraint will
consume more than his income in period 1.
consume less than his income in period 2.
consume less than his income in period 1.
consume more than is income in period 2.
?
The keynesian consumption function describes
the relationship between total consumer spending and total before tax income.
the relationship between total consumer spending and disposable income.
the relationship between total consumer spending and wealth.
the relationship between total consumer spending and wealth and disposable income.
?
Which of the following statements best describes the relationship between consumption spending and disposable income?
The correlation between levels of income and levels of disposable income is high while the correlation between changes in income and changes in disposable income is high.
The correlation between levels of income and levels of disposable income is low while the correlation between changes in income and changes in disposable income is high.
The correlation between levels of income and levels of disposable income is low while the correlation between changes in income and changes in disposable income is low.
The correlation between levels of income and levels of disposable income is high while the correlation between changes in income and changes in disposable income is low.
?
Which of the following statements is true?
The long run propensity to consume is higher than the short run propensity to consume.
The long run propensity to consume is lower than the short run propensity to consume.
The long run propensity to consume is equal to the short run propensity to consume.
The long run propensity to consume is sometimes higher and sometimes lower than the short run propensity to consume depending on the state of the economy.
?
According to Milton Friedman’s Permanent Income Hypothesis, the marginal propensity to consume permanent income is ____________, whereas the propens...
high, high
high, low
low, high
low, low
?
According to the Lifecycle Hypothesis, consumption is determined by two factors:
labour income and by the stock of assets accumulated over a lifetime.
labour income and wealth.
labour income and the return on assets accumulated over a lifetime.
labour income and past consumption.
?
A lower real interest rate means a _________ budget line.
steeper
flatter
vertical
horizontal
?
According to the lifecycle hypothesis, consumption is a function of the following variables except
permanent income.
labour income.
accumulated wealth.
age
