1.Table 23-4NationalIncomeConsumptionSavingMPCMPS$2,000$1,900$1003,0002,7003004,0003,5005005,0004,30070085)Answer: TheMPCis defined as:MPC=ΔCΔY=$2,700-1,900$3,000-2,000=$800$1,000=0.8The MPS is defined as:MPS=ΔSΔY=$300-100$3,000-2,000=$200$1,000=0.2At every level of income theMPCis 0.8 and at every level of income theMPS=0.2.Therefore,MPC+MPSis always equal to 1.Using the table:NationalIncomeConsumptionSavingMPCMPS$2,000$1,900$100-----3,0002,7003000.80.24,0003,5005000.80.25,0004,3007000.80.2Diff: 2Page Ref: 757-759/383-385Topic: Income, Consumption, and SavingLearning Outcome: Macro 8: Investigate the relationship between income and expendituresAACSB: Analytic Skills86) Suppose the United States experiences a long period of relatively stable prices while othercountries experience long periods of inflation. How will this affect U.S. net exports?86)Answer: If inflation in the United States is lower than inflation in other countries, then pricesof products and services produced in the United States increase at a slower pacethan the prices of products and services of other countries. This difference in theprice levels increases the demand for U.S. goods relative to foreign goods. U.S.exports increase, imports decrease, and U.S. net exports rise.Diff: 2Page Ref: 765/391Topic: The Price Level and Net ExportsLearning Outcome: Macro 8: Investigate the relationship between income and expendituresAACSB: Reflective Thinking20
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
- Three '11
- AACSB, Page Ref, 83