If Consumption Increases While Income Remains the Same, the Average

question 187

Multiple Choice

If consumption increases while income remains the same, the average propensity to consume will

• A) increase and then decrease.
• B) remain constant.
• C) increase.
• D) decrease.

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Definitions:

Cash

A form of liquid asset that includes currency and other easily accessible bank balances.

Prepaid Insurance

Refers to payments made in advance for insurance coverage, recorded as an asset on the balance sheet until the period to which the insurance relates.

Historical Cost

The original monetary value of an asset or transaction, without adjusting for inflation or market valuation changes.

Merchandise Inventory

The total cost of all the goods a company intends to sell, including items purchased for resale.