2026/2027
Gmail:
EC 302 Final Exam Questions with
Answers| Verified
When does the Keynesian theory of consumption NOT hold? Ans: In
the long run
Other things being equal, the Neoclassical model of investment
predicts that net investment will increase when the: Ans:
Depreciation rate falls
Which of the following is the weighted sum of the prices of a basket of
domestically and foreign produced goods? Ans: CPI
In the ModiglianiLife-Cycle Theory, if the number of years to
retirement increases, life resources will_____________
and current consumption will ____________. Ans: Increase; increase
5. The sum of wages and gross profits is defined as, Ans: GDI (gross
domestic income)
The measure of prices mostly used to announce inflation is the Ans:
CPI
n equilibrium, the real rental price of capital is equal to Ans: Marginal
Product of Capital
The marginal cost of capital is determined by all of the following
EXCEPT Ans: Corporate Profit Rate
The marginal cost of capital is determined by all of the following Ans:
-Rate of depreciation
-interest rate
-price of capital and its rate of change
When does the Keynesian theory of consumption hold Ans: -in cross
sections
, 2026/2027
Gmail:
-in cyclical observations
Firms find it profitable to add to their capital stock if, Ans: marginal
product of capital exceeds the real cost of capital
When the inflation rate is positive Ans: 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; Ans: increase by 0.20
As national income increases: Ans: 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: Ans: permanent
income
The marginal propensity to consume is equal to: Ans: change in
consumption/ change in income
An increase in the marginal propensity to consume will: Ans: lead to
the consumption function becoming steeper
Which of the following are characteristic of Friedman's 'Permanent
Income Hypothesis'? Ans: 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'? Ans: 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: Ans: 98.04 you
calcylate this by taking 100 / (1+.02) = 98.04
Gmail:
EC 302 Final Exam Questions with
Answers| Verified
When does the Keynesian theory of consumption NOT hold? Ans: In
the long run
Other things being equal, the Neoclassical model of investment
predicts that net investment will increase when the: Ans:
Depreciation rate falls
Which of the following is the weighted sum of the prices of a basket of
domestically and foreign produced goods? Ans: CPI
In the ModiglianiLife-Cycle Theory, if the number of years to
retirement increases, life resources will_____________
and current consumption will ____________. Ans: Increase; increase
5. The sum of wages and gross profits is defined as, Ans: GDI (gross
domestic income)
The measure of prices mostly used to announce inflation is the Ans:
CPI
n equilibrium, the real rental price of capital is equal to Ans: Marginal
Product of Capital
The marginal cost of capital is determined by all of the following
EXCEPT Ans: Corporate Profit Rate
The marginal cost of capital is determined by all of the following Ans:
-Rate of depreciation
-interest rate
-price of capital and its rate of change
When does the Keynesian theory of consumption hold Ans: -in cross
sections
, 2026/2027
Gmail:
-in cyclical observations
Firms find it profitable to add to their capital stock if, Ans: marginal
product of capital exceeds the real cost of capital
When the inflation rate is positive Ans: 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; Ans: increase by 0.20
As national income increases: Ans: 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: Ans: permanent
income
The marginal propensity to consume is equal to: Ans: change in
consumption/ change in income
An increase in the marginal propensity to consume will: Ans: lead to
the consumption function becoming steeper
Which of the following are characteristic of Friedman's 'Permanent
Income Hypothesis'? Ans: 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'? Ans: 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: Ans: 98.04 you
calcylate this by taking 100 / (1+.02) = 98.04
