Macroeconomics - national income and social accounting, consumption function and its modern developments, investment function and its determinants - One Line Questions

1. If the marginal propensity to consume (MPC) is 0.8, what is the marginal propensity to save (MPS)? — 0.2
2. If disposable income increases by $100 billion and consumption increases by $80 billion, the marginal propensity to consume (MPC) is: — 0.8
3. Which of the following is an example of investment in macroeconomics? — A company building a new factory.
4. The permanent income hypothesis implies that changes in current income that are perceived as temporary will have: — A small impact on consumption.
5. What is the primary determinant of investment according to classical economics? — Interest rates
6. According to the investment function, an increase in the interest rate will typically lead to: — A decrease in investment spending.
7. Which of the following is a factor that shifts the consumption function upwards? — Increased consumer confidence
8. A decrease in the expected profitability of future investments will likely lead to: — A decrease in the marginal efficiency of capital.
9. Which of the following is considered a determinant of the investment function? — All of the above
10. Which of the following is a measure of national income? — Net National Product (NNP)
11. The 'ratchet effect' in consumption behavior suggests that: — Consumers' current spending is influenced by their past peak consumption levels.
12. Which of the following is a key assumption of the simple Keynesian consumption function? — Consumption depends primarily on current disposable income.
13. Which component is NOT typically included in the expenditure approach to calculating GDP? — Transfer payments made by the government
14. What does the term 'autonomous consumption' refer to in the consumption function? — Consumption that occurs even when disposable income is zero.
15. The concept of 'induced consumption' in the consumption function refers to: — Consumption that varies directly with disposable income.
16. Which of the following is a determinant of autonomous consumption? — Wealth
17. Milton Friedman's 'permanent income hypothesis' suggests that consumption is primarily determined by: — Expected future income (permanent income).
18. If a firm expects future demand for its products to increase, it is likely to: — Increase its current investment in capital.
19. Which of the following is a component of Gross National Income (GNI)? — Net income from abroad
20. What is Net National Product (NNP)? — GDP minus depreciation.
21. The marginal propensity to consume (MPC) is generally assumed to be: — Between 0 and 1
22. Which of the following is the broadest measure of a nation's economic performance? — Gross Domestic Product (GDP)
23. The 'Keynes effect' suggests that a fall in the price level leads to: — Lower interest rates, increased investment, and higher output.
24. What is the accelerator effect in investment theory? — Investment spending depends on the rate of change of output or income.
25. Which of the following is a limitation of using GDP as a measure of economic well-being? — It does not account for income inequality or environmental degradation.
26. The concept of 'relative income hypothesis' was proposed by: — James Duesenberry
27. What is the difference between Nominal GDP and Real GDP? — Nominal GDP measures output at current prices, while Real GDP measures output at constant prices.
28. In the context of the investment function, 'user cost of capital' includes: — The purchase price, depreciation, and financing costs of capital.
29. The 'own-user cost of capital' is the cost of using a capital asset, which includes: — Interest cost and depreciation.
30. According to the life-cycle hypothesis, individuals tend to: — Save most of their income during their working years and dissave during retirement.
31. Which of the following best describes the relationship between savings and investment in the basic Keynesian model? — Savings always equal investment.
32. According to the 'life-cycle hypothesis' of consumption, individuals tend to: — Smooth their consumption over their entire lifetime by borrowing and saving.
33. What does the term 'social accounting' encompass? — The systematic recording and reporting of a nation's economic transactions.
34. The 'marginal propensity to invest' is related to the concept of: — The change in investment due to a change in output or expected future profits.
35. Social accounting is concerned with: — The measurement and reporting of a nation's economic activities.
36. The 'paradox of thrift' suggests that if everyone tries to save more during a recession: — Overall aggregate demand will fall, leading to lower income and potentially lower total savings.
37. The 'stock' of capital refers to: — The total value of capital goods available at a specific point in time.
38. The concept of 'psychological law' in Keynesian economics relates to: — The tendency for people to increase their consumption as income increases, but not by as much as the increase in income.
39. In Keynesian economics, the investment function is primarily influenced by: — The expected rate of profit (marginal efficiency of capital) and the interest rate.
40. According to the basic Keynesian consumption function, C = a + bYd, what does 'a' represent? — Autonomous consumption (consumption independent of income).
41. In Keynesian economics, the marginal propensity to consume (MPC) is defined as: — The change in consumption spending resulting from a one-unit change in income.
42. The 'Tobin's q' theory of investment relates investment to: — The ratio of the market value of a firm's assets to their replacement cost.
43. Which of the following best describes the Consumption Function? — The relationship between the level of consumption spending and the level of disposable income.
44. What does Gross Domestic Product (GDP) measure? — The total market value of all final goods and services produced within a country in a specific period.
45. The 'marginal efficiency of capital' (MEC) refers to: — The rate of return that equates the expected future returns of an investment with its current cost.
46. In the context of national income accounting, 'value added' refers to: — The difference between a firm's sales revenue and the cost of its intermediate inputs.
47. What is the primary role of the investment function in macroeconomic models? — To determine the level of aggregate demand and national income.
48. What is the primary purpose of calculating national income statistics? — To assess the overall health and performance of an economy.
49. The income approach to calculating GDP sums up: — Wages, salaries, rent, interest, profits, and indirect business taxes.
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