Question: TRUE OR FALSE 1. Consumption function shows the relationship between consumption expenditure and various level of total income. 2. Marginal propensity to consume varies between

TRUE OR FALSE 1. Consumption function shows the relationship between consumption expenditure and various level of total income. 2. Marginal propensity to consume varies between zero and infinity. 3. The sum of average propensity to consume and marginal propensity to consume is always equal to one. 4. In the equation C=500 + 0,80Y, marginal propensity to save is equal to 30 percent. 5. When saving is equal to zero, consumption is equal to disposable income. Question 2 1. If firms invest out of retained profit rather than borrowed capital, will it investment decision be affected by interest rate? Explain ( 10 marks)

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