If an Increase in a Householdʹs Disposable Income from $10,000

question 304

Multiple Choice

If an increase in a householdʹs disposable income from $10,000 to $12,000 boosts its consumption expenditure from $8,000 to $9,000, the

• A) slope of the consumption function is 0.2
• B) household is dissaving.
• C) slope of the consumption function is 1000.
• D) slope of the consumption function is 0.5

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Definitions:

Required Rate

The minimum expected return by investors to compensate for the risk of an investment, often used in capital budgeting.

Useful Life

The estimated period over which a fixed asset is expected to be usable by an organization, impacting its depreciation calculations.

Straight-Line

A method of calculating depreciation or amortization of an asset evenly across its useful life.

Discount Rate

The specific rate used in the context of discounted cash flow analysis to ascertain the present value of cash flows that are to be received in the future.