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Chap024

# Chap024 - Chapter 24 National Income and the Current...

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Chapter 24 - National Income and the Current Account Chapter 24 National Income and the Current Account Multiple Choice Questions 1. If the consumption function in a Keynesian model is C = 60 + 0.7Y, then the associated saving function is __________. A . S = - 60 + 0.3Y b. S = - 60 + 0.7Y c. S = 40 + 0.3Y d. S = - 40 + 0.3Y 2. If the "multiplier" in a Keynesian open economy is 2.0, this is consistent with which one of the following combinations of the marginal propensity to consume (MPC) and the marginal propensity to import (MPM)? (Assume that there is no government sector.) A . MPC = 0.7, MPM = 0.2 b. MPC = 0.3, MPM = 0.2 c. MPC = 0.8, MPM = 0.2 d. MPC = 0.5, MPM = 0.2 3. (This question pertains to Appendix A material.) In which one of the following situations is the "multiplier" for a given autonomous change in investment spending the largest? a. MPS = 0.4, MPM = 0.2, t = 0.25 b. MPS = 0.4, t = 0.25 and the economy has no foreign trade c. MPS = 0.25, MPM = 0.1, t = 0.2 D . MPS = 0.25, MPM = 0.1, t = 0.2, and the economy has "foreign "repercussions." 4. In an open-economy Keynesian income model of the sort used in Chapter 24, at the equilibrium level of income, a. S + X + T = Y + M + G b. S + I + (T - G) = M - X C . S + M + T = I + X + G d. S + (G - T) - I = (X - M) 24-1

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Chapter 24 - National Income and the Current Account 5. If an economy has a marginal propensity to import of 0.3 and the economy's balance-of-
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Chap024 - Chapter 24 National Income and the Current...

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