4. Given that mpi=.2, we know that .2 of every dollar increase in gross income is a leakage due to imports. Since the increase in income is $100, we know the leakage due to imports is:
A) $100B) $80C) $20

D) 20 centsFeedback: We have three leakages: tracing out 100: for every additional dollar in gross income,the consumer saves 20 cents since the mpc = .8. The government gets 25 cents since the tax rate is .25. And finally, 20 cents is leaked out to the purchase of imported goods. Multiplying by 100 we have the following: Y up by 100, savings up by 20, taxes up by 25, imports up by 20, consumption up by 35Table for Individual Question FeedbackPoints Earned: 3.0/3.0 Correct Answer(s):C
5. Given that the MPC=.8, we know that .2 of every dollar increase in gross income is saved. Since the increase in income is $100, we know the leakage due to savings is:
Correct Answer(s):C6. To find out how much consumption increases we need to take the increase in income ($100) and subtract out the leakages. So take the $100 and subtract your answers from #3, #4 and #5 above. When income increases by $100, consumption increases by:

Correct Answer(s):D
7. What would happen to the multiplier if the mpi rises to .25? Round to 2 decimal places.
Round to 2 decimal places.
3.0/3.0 Correct Answer(s):A
8. What would happen to the size of the leakage if the mpi rises to .25?
A) this would reduce the size of the leakageB) this would increase the size of the leakage Feedback: This would increase the size of the leakage - if you do the math, the new multiplier is 1.54.Table for Individual Question FeedbackPoints Earned: 3.0/3.0 Correct Answer(s):
B