If the marginal propensity to consume is 75 and

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Economics: A Contemporary Introduction
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Chapter 23 / Exercise 01
Economics: A Contemporary Introduction
McEachern
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28. If the marginal propensity to consume is .75, and autonomous consumer spending increases by $100 billion, the income expenditure model would predict that real GDP will increase by:A) $100 billion.B) $750 billion.C) $400 billion.D) $300 billion.
29. Suppose the marginal propensity to consume is equal to 0.90 and investment spending increases by $50 billion. Assuming no taxes and no trade, by how much will real GDP change?
30. Suppose that a financial crisis decreases investment spending by $100 billion and the marginal propensity to consume is 0.80. Assuming no taxes and no trade, by how much will real GDP change?
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Economics: A Contemporary Introduction
The document you are viewing contains questions related to this textbook.
Chapter 23 / Exercise 01
Economics: A Contemporary Introduction
McEachern
Expert Verified
Use the following to answer questions 31-32.Table: Disposable Income and Consumption31. (Table: Disposable Income and Consumption) Referring to the table provided, the autonomous consumer spending is:
32. (Table: Disposable Income and Consumption) Use the information in the table, the MPCis equal to:A) .80.B) 2.C) 1.20D) .60.
33. Consider a simple economy: MPC= 0.75, income =$400 billion and aggregate consumption spending= $400 billion. The autonomous consumption is:
Use the following to answer questions 34-38.Use this scenario to answer questions 155–163.Scenario: Income-Expenditure EquilibriumGDP is $8,000, autonomous consumption is $500, and planned investment spending is $200. The marginal propensity to consume is 0.8. There are not taxes, transfers or government spending in this scenario.Page 13
34. (Scenario: Income-Expenditure Equilibrium) What is the consumption function?
YD
YD
YD
YD35. (Scenario: Income-Expenditure Equilibrium) How much is consumption?
36. (Scenario: Income-Expenditure Equilibrium) How much is total (planned) spending?A) $7,100B) $6,400C) $8,000D) $700
37. (Scenario: Income-Expenditure Equilibrium) How much is unplanned inventory investment?
38. (Scenario: Income-Expenditure Equilibrium) Given this situation, firms will tend to:
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Answer Key - Study Guide Midterm #2 B - 2.10
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