CONSUMPTION/SAVING

1- Nazmin Uddin works in a local office as a secretary three days a week. She lives with her parents
in a small apartment.
Meer Ali owns a successful fitness centre that employs about twenty people and lives in a large house.
Which is likely to be true? J03
A- Nazmin spends a smaller proportion of her income than Meer.
B- Nazmin saves most of her income.
C- Nazmin would find it easier than Meer to borrow money.
D- Nazmin has a lower disposable income than Meer.

2-The table shows the proportion of income saved for different age groups. J03/J12

What can be concluded from this data?

A- The youngest age group spends more than the oldest age group.

B- The 50 - 62 age group saves the highest proportion of its income.

C- The 50 - 62 age group has the highest level of income.
D- The older age groups earn more than the younger age groups

3-There is an increase in interest rates. What is the likely effect on saving and borrowing?
J03/N13
4- The table shows how three people spend their income. J04 /

Place the three people in the most likely order of income, from highest income to lowest income.
A- X, Y, Z
B- Y, Z, X
C- Z, X, Y
D- Z, Y, X

5- The table shows the weekly values of certain items for the average person in each group.
Which group saves the most on average? J04

6-What would be most likely to encourage saving N04

A-a rise in the exchange rate

B-a rise in the goods and services tax rate

C-a rise in the income tax rate

D-a rise in the interest rate

7- What will be the most likely effect of a fall in interest rates on saving and borrowing? N13

8-What might cause a fall in the proportion of income that a person saves J05

A-a rise in the income tax

B-a rise in interest rate

C-a rise in real income

D-a rise in the population

9- The table shows the percentages of consumer spending on different items in four countries, which
have similar geographical conditions and climate.
Which country is likely to have the highest standard of living? N05

10- Why might a country’s central bank raise its interest rate? N06
A- to encourage saving
B- to increase the money supply
C- to raise funds for the government
D- to reduce the level of employment
11-What will lead to increase in spending J07

A-an increase in the rate of interest

B-a reduction in the rate of interest

C-a reduction in expenditure by firms on advertising

D-an increase in the rate of income tax

12- Which is the most important factor that affects how much a family saves? J07
A- the income of the family
B- the level of taxation
C- the rate of inflation
D- the reliability of banks

13- In India, there is a considerable gap between the incomes of the rich and the incomes of the poor.
In 2006, there were 6 million rich households with an annual income above 215 000 rupees and 50
million poor households with an annual income less than 22 000 rupees.
What is most likely to be true about spending? J08

14- In which way will an increase in income be most likely to affect the amount of spending and
saving of an individual? N08
15- In August 2007 the Central Bank of Swaziland increased its interest rate from 9.5 % to 10 %.
Which effect would this be likely to have on producers and consumers? N09

16- A person is most likely to save more when there is an increase in a country’s
A- exchange rate. J10
B- inflation rate.
C- interest rates.
D- money supply.

17- What may cause an individual to save a higher proportion of their income? J11
A- a belief that the price of goods will rise in the future
B- a fall in the rate of interest paid by the country’s banks
C- a fear that income will fall in the future
D- a rise in the individual’s wish to enjoy higher consumption immediately

18-In 2009, the Chinese govt tried to increase household spending.

Which policy measure would have been most likely to achieve this objective

A-an increase in both direct and indirect taxes

B-a reduction in subsidies given to manufactures

C-a requirement for commercial banks to reduce their lending

D-a switch from public to private sector provision of health care and pensions.

19-Which motive is most likely to increase the wish to open a savings account

A-to have cash immediately available

B-to prepare for future expenditure

C-to satisfy essential goods

D-to widen present consumption choices

20- In 2008–2009 the central bank of a developed country reduced interest rates from 5 % to 0.5 %
per year to stimulate the economy.
How would this policy have affected the amount saved and the cost of borrowing by individuals?
J12

21- What might encourage a consumer to save rather than to spend? N12
A- being made unemployed
B- discounts on products
C- government subsidies to producers
D- high interest rates

22-

23-Why may rise in the rate of interest cause some people to save less J13

A-they may be saving for a fixed period 10 year term

B-they may be saving out of habit

C-they may be saving to leave as much money as possible to their children

D-they may be saving to raise a particular sum of money

24 What is the most likely result of an increase in interest rates? J13

A- a rise in investment
B- a rise in borrowing
C- a fall in consumer spending
D- a fall in productivity

Answers:-

1-D Nazmin has a lower disposable income than Meer because Meer can afford a big house to
enjoy comfortable life. While disposable income is the income after the payment of income taxes.
When a person can afford luxurious facilities, it means he has more income after the payment of
taxes.

2-B the 50-62 age group saves the highest proportion of its income i.e. 29 percent

3-C Rise in interest rate leads to rise in saving as people will try to keep money into their saving
account to earn more interest. But borrowings will fall because now it would be more expensive to
take loans as borrowers will have to pay more interest on loans. Keep in mind people get interest on
saving and pay interest on borrowings

4-C rich people spend more proportion of income on entertainment and luxury while poor spend
more proportion of their income on needs.

5-A employed worker can save more i.e. 150 dollar[500 plus 50 minus 400=150]

6-D when interest rate is high then people will save in the bank to earn interest

7-B low interest rate encourage borrowings and discourages savings

8-A a rise in income tax decreases the disposable income of the people, which is available to them
or spending. So, saving will fall due to rise in direct taxes like income tax.

9-A the countries with highest standard of living spend more on entertainment and housing while
less on food. Vice versa is true for low income countries.

10-A interest rate is increased to encourage saving because people save money in their bank
account to earn more interest

11-B a reduction in the rate of interest while lead to increase in spending because now people will
not save money in their bank account as bank is offering low rate of interest. In the same way, it will
be very easy to take loan from the bank at comfortable rate due to which people will take more
loans and they will spend more

12-A the income of the family is the main determination to affect saving. Those who earn more
can save more and vice versa

13-B rich spend more money on food while poor spend more proportion of their income on food
but their actual amount will be very low as compared to the rich

14-D rising income lead to more saving as well as spending

15-A producers will borrow less and consumers will save more because due to rise in interest rate
saving rises and borrowing falls

16-C increase in interest rate leads to increase in saving

17-C A FEAR THAT INCOME WILL FALL IN THE FUTURE WILL MAKE A MAN TO SAVE MORE, TO
PREVENT PROBLEMS IN FUTURE

18-D a switch from public to private sector provisions of health care and pensions will result in
increase in household spending. Other options might be correct but this is the most appropriate

19-B to prepare for future expenditure is a wish which will increase saving

20-A fall in interest rate reduces both saving and the cost of borrowing
21-D high interest rate motivates the poor to save more and spend less because when commercial
banks give high interest on deposits, people will prefer to save money in their bank account to earn
high interest. Therefore saving will rise and people will have lesser amount of money available for
spending

23-D they may be saving to raise a particular sum of money due to which they will not be further
attracted to save, by a higher rate of interest

24-C when interest rate is high, people will save more and spend less. It is the main factor that
affect saving and spending.