Suppose consumer confidence improves and as a result, consumer spending increases by $50 billion dollars. Assume households spend $0.80 of each extra dollar of income and save the remaining $0.20
Other things equal, calculate by how much spending will increase during:
a. the first round through the circular flow.
b. the second round through the circular flow.
c. the third round through the circular flow.
d. the fourth round through the circular flow.
a. Through the first round of the circular flow, spending will increase by $50 billion.
b. Through the second round of the circular flow, spending will increase by ($50 billion × 0.80 ) = $40 billion.
c. Through the third round of the circular flow, spending will increase by ($40 billion × 0.80 ) = $32 billion.
d. Through the fourth round of the circular flow, spending will increase by ($32 billion × 0.80 ) = $25.6 billion.
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Which of the following is a characteristic of capitalism?
a. Government ownership of all capital. b. Government decision-making is preferred to decentralized decision-making. c. Market determination of prices and quantity. d. Equality of income.
When a natural monopoly is? inevitable, the government often sets a maximum price that the monopolist can charge consumers. Under an average ?-cost pricing? policy, the government picks the price at which the market demand curve intersects the? monopolist's long ?-run ?average-cost curve. The firm will earn a normal profit.
When a natural monopoly is? inevitable, the government often sets a
price that the monopolist can charge consumers. Under
pricing? policy, the government picks the price at which the
curve intersects the? monopolist's
?average-cost curve. The firm will earn
profit.
On the graph of GDP, government spending and net exports are:
A. horizontal lines because they are autonomous expenditures. B. vertical lines because the level of spending is fixed. C. upward sloping because they increase as GDP increases. D. downward sloping because they decrease as GDP increases.
"Price elasticity of supply" is defined as
What will be an ideal response?