The Great Depression and the Keynsian Revolution Quiz

The consumption function is concerned with the relationship between consumption spending and:

• investment spending.
• total income.
• disposable income.
• savings.

That portion of an EXTRA dollar of disposable income that is spent on consumption is called:

• personal consumption expenditure.
• average propensity to consumer.
• marginal propensity to consume.
• the consumption function.

According to the theory of John Maynard Keynes and his followers, NNP is dependent MAINLY on

• consumer spending levels.
• current tax rates.
• the influence of labor unions.
• current trends in business investment.

Suppose that the current marginal propensity to consume equals .75. What will be the impact on equilibrium NNP of an investment of $1 billion?

• $.75 billion
• $1.33 billion
• $4 billion
• It cannot be determined from the information given.