Crowdly

Depreciation refers to the:

fall in the price of output that the business produces.

spending by a business on new capital assets.

decline in the quality of output produced by a business.

decline in capital due to wear and tear, obsolescence, accidental damage, and aging.

An increased government budget deficit causes the ____ loanable funds to shift to the _____.

Select (all) true statements.

Permanent income has no effect on saving.

Permanent income has smaller effect on consumption than temporary income.

Permanent income is your average lifetime income.

Permanent income is constant.

For a given level of income,

an increase in saving leads to an increase in wealth.

wealth is a stock of assets minus liabilities.

wealth can change.

an increase in consumption leads to a decrease in wealth.

An increase in real interest rate

decreases saving and decreases consumption.

increases saving and decreases consumption.

increases saving and increases consumption.

decreases saving and increases consumption.

Consumption increases when income increases.

This is shown as a movement along the consumption function.

so the marginal propensity to consume is negative.

The consumption function is downward sloping.

and saving decrease as income increases.

If households are confident about the state of the economy:

precautionary savings will decrease and consumption will go up.

precautionary savings will decrease and consumption will go down.

precautionary savings will increase and consumption will go down.

precautionary savings will increase and consumption will go up.

Which of the following are the impediment to consumption smoothing?

Income changes over life cycle.

Households want to save.

Behavioural constraints means consumers do not always make rational consumption decisions.

Credit constraints makes it hard to borrow.

Suppose falling interest rates in Australia discourage saving. What effect does this have on the consumption function in Australia?

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Figure C

Figure B

Figure D

Figure A