Which of the following statements about marginal propensities is true

a.If precautionary saving rises in an economy, this means that the marginal propensity to save has gone down.

b.Relatively high-income households have a lower MPC than relatively low-income households

c.Low-income households are likely to have a marginal propensity to save that is higher than their marginal propensity to consume

d.Looking at the standard Keynesian consumption function (graph of C versus Y), we see that MPC goes up as national income goes up

The decline in home prices during the 2006-07 housing bust eliminated a large fraction of many households' home equity. The most likely outcome of this large decrease in the value of households' assets is:

1.a leftward shift in the aggregate demand curve

2.a leftward shift in the aggregate supply curve

3.a rightward shift in the aggregate demand curve

4.a rightward shift in the aggregate supply curve

Firms react to unplanned increases in inventories by

1.increasing planned investment

2.reducing the orders they send to suppliers.

3.increasing the orders they send to suppliers

4.increasing prices to customers

A decrease in the marginal propensity to consume will:

1.cause the consumption function to become steeper

2.cause consumption to become less responsive to changes in households' disposable incomes

3.shift the consumption function downwards

4.shift the consumption function upwards

Which of the following statements is true about the marginal propensity to consume?

1.MPC permanent income > MPC temporary income and MPC high income household < MPC low income household

2.MPC permanent income < MPC temporary income and MPC high income household < MPC low income household

3.MPC permanent income > MPC temporary income and MPC high income household > MPC low income household

4.MPC permanent income < MPC temporary income and MPC high income household > MPC low income household

After the Great Depression, the US savings rate increased, as households sought to build a buffer of savings to protect against similar catastrophic income losses in the future. This is an example of

1.Friedman's permanent income model

2.Keynesian consumption function

3.Modigliani's life-cycle model

4.Precautionary savings