EC 302 Final Exam Questions with
Answers 100% PASS
When does the Keynesian theory of consumption NOT hold? - CORRECT
ANSWER-In the long run
Other things being equal, the Neoclassical model of investment predicts that net
investment will increase when the: - CORRECT ANSWER-Depreciation rate falls
Which of the following is the weighted sum of the prices of a basket of
domestically and foreign produced goods? - CORRECT ANSWER-CPI
In the ModiglianiLife-Cycle Theory, if the number of years to retirement increases,
life resources will_____________
and current consumption will ____________. - CORRECT ANSWER-Increase;
increase
5. The sum of wages and gross profits is defined as, - CORRECT ANSWER-GDI
(gross domestic income)
The measure of prices mostly used to announce inflation is the - CORRECT
ANSWER-CPI
,n equilibrium, the real rental price of capital is equal to - CORRECT ANSWER-
Marginal Product of Capital
The marginal cost of capital is determined by all of the following EXCEPT -
CORRECT ANSWER-Corporate Profit Rate
The marginal cost of capital is determined by all of the following - CORRECT
ANSWER--Rate of depreciation
-interest rate
-price of capital and its rate of change
When does the Keynesian theory of consumption hold - CORRECT ANSWER--
in cross sections
-in cyclical observations
Firms find it profitable to add to their capital stock if, - CORRECT ANSWER-
marginal product of capital exceeds the real cost of capital
When the inflation rate is positive - CORRECT ANSWER-nominal GDP grows
more than real GDP
If the Keynesian consumption function is given by C = 150 + 0.80Y, and Y
increases by 1 unit, then savings; - CORRECT ANSWER-increase by 0.20
COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED
, As national income increases: - CORRECT ANSWER-the average propensity to
consume falls and gets nearer in value to the marginal propensity to consume
13. Friedman's theory of consumption focuses on: - CORRECT ANSWER-
permanent income
The marginal propensity to consume is equal to: - CORRECT ANSWER-change
in consumption/ change in income
An increase in the marginal propensity to consume will: - CORRECT ANSWER-
lead to the consumption function becoming steeper
Which of the following are characteristic of Friedman's 'Permanent Income
Hypothesis'? - CORRECT ANSWER-i) The main influence on long-run
consumption is some form of long-run average income
ii) Consumption will tend to be a constant proportion of long-run average income
(permanent income)
Which three of the following are characteristics of Modigliani's 'Life Cycle
Hypothesis'? - CORRECT ANSWER-Consumption is seen as a constant
proportion of long-run average (lifetime) income
If inflation rate in period t is given as 0.02 and consumer price index in period t+1
is 100 then CPI in period t is given by: - CORRECT ANSWER-98.04 you calcylate
this by taking 100 / (1+.02) = 98.04
Answers 100% PASS
When does the Keynesian theory of consumption NOT hold? - CORRECT
ANSWER-In the long run
Other things being equal, the Neoclassical model of investment predicts that net
investment will increase when the: - CORRECT ANSWER-Depreciation rate falls
Which of the following is the weighted sum of the prices of a basket of
domestically and foreign produced goods? - CORRECT ANSWER-CPI
In the ModiglianiLife-Cycle Theory, if the number of years to retirement increases,
life resources will_____________
and current consumption will ____________. - CORRECT ANSWER-Increase;
increase
5. The sum of wages and gross profits is defined as, - CORRECT ANSWER-GDI
(gross domestic income)
The measure of prices mostly used to announce inflation is the - CORRECT
ANSWER-CPI
,n equilibrium, the real rental price of capital is equal to - CORRECT ANSWER-
Marginal Product of Capital
The marginal cost of capital is determined by all of the following EXCEPT -
CORRECT ANSWER-Corporate Profit Rate
The marginal cost of capital is determined by all of the following - CORRECT
ANSWER--Rate of depreciation
-interest rate
-price of capital and its rate of change
When does the Keynesian theory of consumption hold - CORRECT ANSWER--
in cross sections
-in cyclical observations
Firms find it profitable to add to their capital stock if, - CORRECT ANSWER-
marginal product of capital exceeds the real cost of capital
When the inflation rate is positive - CORRECT ANSWER-nominal GDP grows
more than real GDP
If the Keynesian consumption function is given by C = 150 + 0.80Y, and Y
increases by 1 unit, then savings; - CORRECT ANSWER-increase by 0.20
COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED
, As national income increases: - CORRECT ANSWER-the average propensity to
consume falls and gets nearer in value to the marginal propensity to consume
13. Friedman's theory of consumption focuses on: - CORRECT ANSWER-
permanent income
The marginal propensity to consume is equal to: - CORRECT ANSWER-change
in consumption/ change in income
An increase in the marginal propensity to consume will: - CORRECT ANSWER-
lead to the consumption function becoming steeper
Which of the following are characteristic of Friedman's 'Permanent Income
Hypothesis'? - CORRECT ANSWER-i) The main influence on long-run
consumption is some form of long-run average income
ii) Consumption will tend to be a constant proportion of long-run average income
(permanent income)
Which three of the following are characteristics of Modigliani's 'Life Cycle
Hypothesis'? - CORRECT ANSWER-Consumption is seen as a constant
proportion of long-run average (lifetime) income
If inflation rate in period t is given as 0.02 and consumer price index in period t+1
is 100 then CPI in period t is given by: - CORRECT ANSWER-98.04 you calcylate
this by taking 100 / (1+.02) = 98.04
