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HW3answers - EEGS 202 Gupta Home-work 3 Answers Part A...

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EEGS 202, Gupta Home-work 3 Answers Part A: Multiple Choice 1. The Keynesian model of aggregate expenditure assumes that A) individual firms’ prices are flexible but the price level is fixed. B) both individual firms’ prices and the price level are flexible. C) both individual firms’ prices and the price level are fixed. D) individual firms’ prices are fixed but the price level is flexible. Answer: C 2. The consumption function relates consumption expenditure to 3. Which of the following will NOT shift the consumption function upward? 4. In the above figure, consumption and disposable income are equal at 5. In the above figure, at a disposable income level of $200 billion, saving equals A) disposable income. 1
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B) zero. C) $40 billion. D) consumption expenditures. Answer: B 6. In the above figure, the line AB is called 7. An increase in disposable income shifts 8. If the marginal propensity to consume is 0.8, every $10 increase in disposable income increases 9. For a household, the marginal propensity to save plus the marginal propensity to consume A) equals 1. B) equals 0. C) equals a number that is larger the larger the household’s disposable income. D) equals a number that is smaller the larger the household’s disposable income. Answer: A 10. If an increase in a household’s disposable income from $10,000 to $12,000 boosts its consumption expenditure from $8,000 to $9,000, the
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