Which Statement Is Consistent with What Keynes Believed About Consumption

question 7

Multiple Choice

Which statement is consistent with what Keynes believed about consumption and disposable income?

• A) Consumption depends upon disposable income and falls as disposable income rises.
• B) Consumption rises by the same amount as disposable income rises.
• C) Consumption rises by less than disposable income rises.
• D) Disposable income depends upon consumption.

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Definitions:

Treasury Stock

Shares that were once part of the outstanding shares and have been bought back by the issuing company, reducing the amount of outstanding stock on the market.

Yield to Maturity

The total return anticipated on a bond if the bond is held until it matures. YTM is considered a long-term bond yield expressed as an annual rate.

Semiannual Coupon Bonds

Bonds that pay interest to their holders twice a year.

Flotation Cost

The total costs associated with issuing new securities, including fees, taxes and underwriting expenses, which are incurred by companies when they raise new capital.