question 4 3. At very low levels of disposable income, A. consumption is greater
ID: 1102807 • Letter: Q
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question 4 3. At very low levels of disposable income, A. consumption is greater than disposable income. B. disposable income is greater than consumption. C. people save most of their incomes. D. consumption is negative. 4. Which statement is true? A. At high levels of disposable income, induced consumption is zero. B. At low levels of disposable income, induced consumption will be greater than autonomous consumption. C. Autonomous consumption will generally equal induced consumption. D. None of these statements is true. 5. At very low levels of disposable income A. saving is negative. B. saving is very high C. consumption is negative. D. consumption is a very small part of income.Explanation / Answer
3) At very low level of disposable income – a) consumption is greater than disposable income.
By disposable income we mean the income earned by person minus the tax he has to pay .If a person disposable income is low, then also he has buy he his food and basic necessities of life, so generally during this period a person’s savings is negative and he consumes more than his income.
4) D) None of the statements are true. Induced consumption has a positive relation with disposable income but autonomous consumption has no relation with disposable income .So we cannot say anything definitely what happens to the relation between induced and autonomous consumption with respect to disposable income.
5) At very low level of disposable income – A) savings is negative. As stated earlier in answer 3 when a person’s disposable income is low he generally spends all of it in consumption, so there is no savings and more over during this time a person consumes more than his income so savings become negative.
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