Assume we have a closed economy. If disposable income is $900 billion when consumption is $810, it can be concluded that
A. autonomous consumption is zero.
B. the marginal propensity to consume is also 0.9.
C. the marginal propensity to save is 0.1.
D. saving is $90 billion.
Answer: D
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Which of the following provides support for the use of discretion in economic policy-making?
A) any policy rule that is based on a particular model will prove wrong if that model is wrong B) the existence of a political business cycle C) the conclusions of Friedman and Schwartz with respect to monetary and fiscal policy D) the Watergate scandal
The consumption function shows
a. how fast the economy is consuming its capital. b. that the amount of national income determines the rate at which the economy consumes its resources. c. that households’ incomes determine how much the households will spend for consumer goods. d. the rate at which people actually use up their consumer goods.
Assume that the central bank increases the reserve requirement. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the GDP Price Index and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. The GDP Price Index falls, and reserve-related (central bank) transactions become more negative (or less positive). b. The GDP Price Index rises, and reserve-related (central bank) transactions remain the same. c. There is not enough information to determine what happens to these two macroeconomic variables. d. The GDP Price Index falls, and reserve-related (central bank) transactions remain the same. e. The GDP Price Index and reserve-related (central bank) transactions remain the same.
When workers are paid higher wages, production costs:
A. rise, supply shifts leftward, and product prices rise. B. rise, supply shifts leftward, and product prices fall. C. rise, supply shifts rightward, and product prices rise. D. fall, supply shifts rightward, and product prices fall.