Lesson 2.2.2

2.2.2 Consumption (C) Quiz: Pearson Edexcel Economics, Unit 2

20 questions

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Lesson 2.2.2, Consumption (C): 20 multiple choice questions for the Pearson Edexcel Economics (9EC0), Unit 2: Theme 2: The UK economy – performance and policies, written with Revision Ninja.

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The 20 questions

  1. What is income remaining after direct taxes have been deducted and benefits added called?

    • National income
    • Discretionary income
    • Gross income
    • Disposable income

  2. Which term describes the proportion of an extra pound of disposable income that is spent?

    • Average propensity to save
    • Marginal propensity to save
    • Average propensity to consume
    • Marginal propensity to consume

  3. What formula calculates the average propensity to save?

    • Consumption over income
    • Savings over income
    • Savings over consumption
    • Income over savings

  4. If disposable income rises by 100 and consumption rises by 80, the marginal propensity to save is:

    • 0.8
    • 0.5
    • 1.8
    • 0.2

  5. What effect does a rise in central bank interest rates typically have on consumer spending?

    • Increases spending
    • Increases disposable income
    • Has no effect
    • Reduces spending

  6. Which economic term describes increased household spending caused by a rise in house prices?

    • Wealth effect
    • Multiplier effect
    • Income effect
    • Substitution effect

  7. Why does an increase in consumer confidence lead to higher household spending today?

    • Lower interest rates
    • Better income expectations
    • Higher direct taxes
    • Reduced asset prices

  8. A household's disposable income rises from 20,000 to 22,000 and its consumption rises from 18,000 to 19,400. What is its MPC?

    • 0.9
    • 0.7
    • 0.6
    • 1.4

  9. A household has disposable income of 30,000 and consumption of 27,000. What is its average propensity to save?

    • 0.9
    • 0.1
    • 3.0
    • 0.3

  10. What do the marginal propensity to consume and marginal propensity to save always sum to?

    • 0
    • 1
    • 100
    • 0.5

  11. Why do higher interest rates reduce spending most for households with variable-rate mortgages?

    • Higher mortgage repayments
    • Higher asset values
    • Lower wealth taxes
    • Reduced saving returns

  12. Which fiscal policy action directly increases household disposable income and consumer spending?

    • Income tax cut
    • VAT increase
    • Interest rate hike
    • Public spending cuts

  13. How does an increase in the marginal propensity to consume affect the multiplier?

    • Increases the multiplier
    • Decreases the multiplier
    • Eliminates the multiplier
    • Leaves multiplier unchanged

  14. How does a fall in household savings affect aggregate demand in the short run?

    • Decreases aggregate demand
    • Has no effect
    • Shifts aggregate supply
    • Increases aggregate demand

  15. What term describes household spending exceeding disposable income?

    • Dissaving
    • Hyperinflation
    • Capital consumption
    • Negative equity

  16. Which factor is a non-income influence on consumer spending?

    • Consumer confidence
    • Marginal propensity
    • Disposable income
    • Income tax rate

  17. A household saves 1,500 out of disposable income of 25,000 in a year. What is its average propensity to save?

    • 0.6
    • 0.06
    • 0.15
    • 1.67

  18. Which income group generally has the highest marginal propensity to consume?

    • Low income
    • Middle income
    • High income
    • Top percentile

  19. What type of saving increases when households fear future unemployment?

    • Precautionary saving
    • Forced saving
    • Contractual saving
    • Corporate saving

  20. According to Keynes, consumer spending depends mainly on which variable?

    • Interest rates
    • Wealth stock
    • Disposable income
    • Future expectations

All Pearson Edexcel Economics quizzes