When the Consumption Function Lies Above the 45-Degree Line, Households

question 148

Multiple Choice

When the consumption function lies above the 45-degree line, households

• A) spend on consumption an increasing percentage of any increase in income.
• B) spend on consumption a decreasing percentage of any increase in income.
• C) are dissaving.
• D) save all of any increase in income.

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Definitions:

Divestiture

The opposite of an acquisition. That is, a company sells a portion of its assets, often a whole division, to another firm or individual.

Market Value

The current price at which an asset or service can be bought or sold in the marketplace, reflecting the value as perceived by the market participants.

Acquiring Firm

This is a company that purchases most or all of another company's shares to gain control over that company.

Replacement Cost

The cost to replace an asset of a company at its current price, without considering depreciation.