Econ 2100 - Exam 3 with
complete verified solutions
Disposable Income is the sum of what two variables? - answer Savings +
Consumption
What is the most important determinant of consumption? - answer Income
Marginal Propensity to Consume (MPC) - answer Change in consumption/
change in disposable income
Marginal Propensity to Save (MPS) - answer change in savings/change in
disposable income
MPC+MPS= - answer 1
Non-Income Determinants of Consumption and Saving - answer 1. wealth
2. borrowing
3. expectations
4. real interest rates
5. Other Conditions (Taxes...)
Interest Rate - Investment Relationship - answer Lower interest rates create
higher demand for investment
Investments - answer expenditures on new plants, equipment, inventory
Interest Rate - answer Cost of money/ Cost of investment
complete verified solutions
Disposable Income is the sum of what two variables? - answer Savings +
Consumption
What is the most important determinant of consumption? - answer Income
Marginal Propensity to Consume (MPC) - answer Change in consumption/
change in disposable income
Marginal Propensity to Save (MPS) - answer change in savings/change in
disposable income
MPC+MPS= - answer 1
Non-Income Determinants of Consumption and Saving - answer 1. wealth
2. borrowing
3. expectations
4. real interest rates
5. Other Conditions (Taxes...)
Interest Rate - Investment Relationship - answer Lower interest rates create
higher demand for investment
Investments - answer expenditures on new plants, equipment, inventory
Interest Rate - answer Cost of money/ Cost of investment
