In a simple model without government spending or taxation, if C = a +bY where C is consumer spending and Y is GDP which of the following statements are correct? Note that some of these questions require you to have read relevant sections of Core Unit 13. [FOUR correct answers] Select one or more: a. The consumption function implies that if GDP is zero, consumption is zero b. b is known as the average propensity to consume c. If there is an increase in consumers who engage in "consumption smoothing", this will cause an increase in a and a decrease in b d. a is known as the marginal propensity to consume e. b is known as the marginal propensity to consume f. a is the level of consumption when Y is zero g. If consumption-smoothing consumers become more optimistic about the future, a will increase. h. If there are more credit-constrained consumers in the economy, this will cause the marginal propensity to consume, to fall
In a simple model without government spending or
Note that some of these questions require you to have read relevant sections of Core Unit 13.
[FOUR correct answers]
Select one or more:
The consumption function implies that if GDP is zero, consumption is zero
b is known as the average propensity to consume
If there is an increase in consumers who engage in "consumption smoothing", this will cause an increase in a and a decrease in b
a is known as the marginal propensity to consume
b is known as the marginal propensity to consume
a is the level of consumption when Y is zero
If consumption-smoothing consumers become more optimistic about the future, a will increase.
If there are more credit-constrained consumers in the economy, this will cause the marginal propensity to consume, to fall
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