Concept of Savings, Investment And Consumption And Their Determinants, APC and MPC, APS and MPS - SS3 Economics Past Questions & Answers - page 1

1

What is savings?

A

 The portion of income spent on consumption

B

The portion of income not spent on consumption

 

C

The portion of income invested in risky assets

CORRECT OPTION: b
2

What is consumption?

A

The use of goods and services by businesses

 

B

The use of goods and services by individuals or households

C

The use of goods and services by the government

CORRECT OPTION: b
3

What is an investment?

A

The use of resources to purchase consumer goods

B

The allocation of resources to long-term projects or assets

 

C

The use of resources to pay off debt

CORRECT OPTION: b
4

What is MPS?

A

The portion of an additional dollar of income spent on consumption

 

B

The portion of an additional dollar of income saved rather than spent on consumption

C

The percentage of total income spent on consumption

CORRECT OPTION: b
5

What is APC?

A

 The portion of an additional dollar of income spent on consumption

B

The portion of an additional dollar of income saved rather than spent on consumption

C

The percentage of total income spent on consumption

 

CORRECT OPTION: c
6

Why is savings important for individuals?

Savings is important for individuals because it allows them to build wealth and achieve their long-term financial goals.

7

How does consumption drive economic growth?

Consumption drives economic growth by creating demand for goods and services. When people spend money on consumption, businesses earn revenue and can hire more workers and invest in their operations.

8

What is the relationship between MPC, MPS, APC, and APS?

The relationship between MPC, MPS, APC, and APS can be described using the following equations: MPC + MPS = 1 and APC + APS = 1. These equations show that the marginal and average propensity must add up to 1.

9

How can understanding MPC, MPS, APC, and APS help economists and policymakers?

Understanding MPC, MPS, APC, and APS can help economists and policymakers understand how changes in income will affect spending and saving patterns in the economy. This can inform policy decisions related to taxation, government spending, and interest rates.

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