Assume that initially G is $100 and equilibrium real GDP demanded is $1,000. If the multiplier is 4 and G increases to $200, real GDP demanded will increase
a. by $100
b. by $2,000
c. by $1,000
d. to $1,400
e. to $2,000

If autonomous net taxes decline by $40 billion and the MPC = 0.75, then equilibrium real GDP demanded
a. declines by $120 billion
b. increases by $120 billion
c. declines by $160 billion
d. increases by $160 billion
e. increases by $40 billion

Assume autonomous net taxes rise by $400; the marginal propensity to consume = 3/4. Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed. As a result, saving will initially
a. fall by $400
b. rise by $300
c. remain unchanged
d. fall by $100
e. rise by $100

Solution Preview

Assume that initially G is $100 and equilibrium real GDP demanded is $1,000. If the multiplier is 4 and G increases to $200,

real GDP demanded will increase
a. by $100
b. by $2,000
c. by $1,000
d. to $1,400
e. to $2,000

The increase in G will raise GDP by 4 times, i.e.,
rise in GDP = increase in G * ...

1. A open economy has a marginalpropensity to import (MPI) equal to 0.2 and a marginalpropensity to consume equal to 0.7. What is marginalpropensity to save of this economy? *It looks as though enough information has not been provided.*
2. A open economy has a marginalpropensity to import (MPI) equal to 0.2 and a margina

Suppose the government increases education spending by $20 billion. How much additional consumption will this increase cause? Would a millionaire and a poor person have the same MPC? Show your work.

Discuss answers to the following questions:
Consider an economy in which: C=100+0.5Y and I=100 - output is equal to income
a) Find equilibrium income.
b) What is the multiplier for consumption spending for this economy?
c) What is the multiplier for investment spending for this economy?
d) What is themarginal pro

Given that themarginalpropensity to consume (MPC) is .875:
(1) What is themarginalpropensity to save (MPS)?
(2) Calculate the spending multiplier.
(3) If the government stimulates the economy via new spending of $150 million:
(a) What is the total projected spending that this could generate throughout the economy

A firm purchases a new computer system for $1M. If themarginalpropensity to consume is 0.8, the final change in national income will be
a. $800,000
b. $1M
c. $1.2M
d. $4M
e. $5M
Which answer is correct, can you explain

If tr=600q-120q(squared) and tc = 80+160q-10q(squared), where q= quantity, tr = total revenue, and tc = total cost, find the profit maximising quantity at which marginal revenue (mr) equals marginal cost (mc)
A company estimates that its total cost function is given by tc=16000+60q and its total revenue function is tr=80q. Wh

Could someone please help with the following true/false question. I am lost on how to figure it out. Thanks so much:)
Q: Themarginalpropensity to consume is 0.8 and autonomous expenditures have just increased by $122. Equilibrium income will drop by $488.

Consider an economy characterized by the following equations:
C = 500 + 0.75Y + 0.05W
I = 150
where C is desired consumption, I is desired investment, W is household wealth, and Y is national income.
a) Suppose W=10,000. Draw the aggerate expenditure function on a scale diagram along the 45 degree line. What is the eq

1. Themarginalpropensity to consume is defined as:
Î"C/Î"Yd.
Î"S/Î"Yd.
Î"Yd/Î"C.
Î"Yd/Î"S.
Î"Yd/Î"S + Î"Yd/Î"S = 1
2. Over time Americans have chosen to cook less at home and dine out more. This change in behavior:
does not affect GDP.