The non-income determinants of consumption include all of the following EXCEPT
A. stock of assets owned by household.
B. real wealth.
C. the interest rate.
D. changes in business investment spending.
Answer: D
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In an economy with no income taxes or imports, the marginal propensity to consume is 0.80. The expenditure multiplier is
A) 1.25. B) 10.0. C) 0.80. D) 5.00. E) 0.20.
Italy has a comparative advantage in the production of
A. beer.
B. pizza.
C. both beer and pizza.
D. neither beer nor pizza.
When a bank receives new deposits, it can make new loans up to the amount of
A) the deposits received. B) the excess reserves generated by the deposits C) the reserves generated by the deposits. D) the required reserves generated by the deposits.
Suppose Country X produces only two goods, food and clothing. At the initial free-trade equilibrium, the country produced 40 units of food and 20 units of clothing, and it exports 10 units of food and imports 10 units of clothing. Now suppose technological innovation in Country X leads to a balanced growth while leaving the relative prices of food and clothing unchanged in the international market. Production of food in Country X rises to 50 units. If consumption of food rises to 42 units, the consumption of clothing
A. rises to 33 units. B. declines to less than 20 units. C. rises to more than 35 units. D. declines to 28 units.