IS. As disposable income decreases, consumption A And saving both increase B And

Question

IS. As disposable income decreases, consumption A And saving both increase B And saving both decrease C. Increases and saving decreases D Decreases and saving increases I6 If the consumption schedule shifts downward, and the shift was not caused by a tax change, then the saving schedule A May shift either upward or downward ? will shift downward C. will shift upward D. Will not shitt 17 Which would shit the consimption schedule upward? A. A decrease in wealth B. An incrcase in wealth C Consumer expectations of falling prices D Consumer expectations of product surpluses 18. An inverse relationship between the rate of intcrest and the level of A Income is suggested by the consumption function B. Prices is suggested by the aggregate supply curve C Employment is suggested by the aggregate demand curve D. Investment spending is suggested by the investment-demand curve 19. Which would decrease investment demand? A. A decrease in business taxes B. An increase in the cost of acquiring capital goods C. An increase in the rate of technological change D. A decrease in the stock of capital goods on hand

Explanation / Answer

Answer 15:

Option B. As disposable income decreases, consumption and savings in the economy decreases. This is because disposable income comprises of savings and consumption and if it declines, then consumption and savings in the economy will decline.

Answer 16:

Option C. As consumption declines , then savings in the economy increases. Thus, downward shift of consumption leads to upward shift of savings curve.

Answer 17:

Option B. An increase in wealth leads to increase in consumption and shifts the consumption schedule upwards.

Answer 18:

Option D. Investment demand curve shows inverse relationship between rate of interest and level of investment demand in the economy.

Answer 19:

Option B. an increase in the cost of acquiring capital goods will decrease investment demand in the economy.

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