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Test: The Keynesian Consumption Function - 1 - B Com MCQ


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10 Questions MCQ Test - Test: The Keynesian Consumption Function - 1

Test: The Keynesian Consumption Function - 1 for B Com 2024 is part of B Com preparation. The Test: The Keynesian Consumption Function - 1 questions and answers have been prepared according to the B Com exam syllabus.The Test: The Keynesian Consumption Function - 1 MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: The Keynesian Consumption Function - 1 below.
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Test: The Keynesian Consumption Function - 1 - Question 1
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What is the meaning of marginal propensity to consume (MPC)?

Detailed Solution for Test: The Keynesian Consumption Function - 1 - Question 1
The marginal propensity to consume (MPC) measures the change in consumption resulting from a change in disposable income. It signifies how much of an increase in income is spent on consumption.
Test: The Keynesian Consumption Function - 1 - Question 2
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Which of the following is true regarding the consumption function?

Detailed Solution for Test: The Keynesian Consumption Function - 1 - Question 2
The consumption function describes the relationship between the amount of consumption and the level of income. It shows how changes in income lead to changes in consumption. Keynes introduced this concept to explain how consumption changes with varying income levels.
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Test: The Keynesian Consumption Function - 1 - Question 3
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What happens to average propensity to consume (APC) as income increases?

Detailed Solution for Test: The Keynesian Consumption Function - 1 - Question 3
In many cases, as income increases, the average propensity to consume (APC) tends to decrease. This means that as people earn more, they tend to save a larger proportion of their income.
Test: The Keynesian Consumption Function - 1 - Question 4
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What relationship exists between average propensity to consume (APC) and average propensity to save (APS)?
Detailed Solution for Test: The Keynesian Consumption Function - 1 - Question 4
The sum of average propensity to consume (APC) and average propensity to save (APS) is always equal to 1. This is because disposable income can either be consumed or saved. Therefore, APC + APS = 1.
Test: The Keynesian Consumption Function - 1 - Question 5
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In the context of the consumption function, what does the term "average propensity to consume" (APC) refer to?
Detailed Solution for Test: The Keynesian Consumption Function - 1 - Question 5
Average propensity to consume (APC) represents the proportion of income that is consumed. It is calculated as consumption divided by disposable income. As income increases, APC may change, influencing consumption patterns.
Test: The Keynesian Consumption Function - 1 - Question 6
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What does the marginal propensity to save (MPS) indicate?
Detailed Solution for Test: The Keynesian Consumption Function - 1 - Question 6
The marginal propensity to save (MPS) indicates how much additional saving is induced by an increase in disposable income. It quantifies the change in savings associated with a change in income.
Test: The Keynesian Consumption Function - 1 - Question 7
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In a non-linear consumption function, how does marginal propensity to consume (MPC) change with an increase in income?
Detailed Solution for Test: The Keynesian Consumption Function - 1 - Question 7
In a non-linear consumption function, as income increases, the marginal propensity to consume (MPC) tends to decrease. This means that the change in consumption for a given change in income becomes smaller as income rises.
Test: The Keynesian Consumption Function - 1 - Question 8
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What is the primary reason consumption increases less than income in a community?
Detailed Solution for Test: The Keynesian Consumption Function - 1 - Question 8
Consumption increases less than income because a portion of the additional income earned by a community is saved rather than spent. This tendency to save is what leads to the gap between income and consumption.
Test: The Keynesian Consumption Function - 1 - Question 9
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What does the consumption function curve show when it coincides with the 45? line?
Detailed Solution for Test: The Keynesian Consumption Function - 1 - Question 9
When the consumption function curve coincides with the 45? line, it indicates that consumption is equal to income at every level of income. This scenario implies that every additional unit of income is fully consumed.
Test: The Keynesian Consumption Function - 1 - Question 10
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In a non-linear consumption function, what happens to average propensity to save (APS) as income increases?
Detailed Solution for Test: The Keynesian Consumption Function - 1 - Question 10
In a non-linear consumption function, as income increases, the average propensity to save (APS) tends to increase. This means that as income rises, a larger proportion of income is saved rather than consumed.
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