If, in an economy, a $200 billion increase in consumption spending creates $200 billion of new income in the first round of the multiplier process and $150 billion in the second round, the multiplier and the marginal propensity to consume will be, respectively:
a. 4.00 and 0.75
b. 2.50 and 0.40
c. 3.33 and 0.70
d. 5.00 and 0.80
a. 4.00 and 0.75
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Recall the Application about how society will cope with increased demands for entitlement programs to answer the following question(s). This Application addresses the impact of increasing life expectancy and aging populations on the costs of government entitlement programs such as Social Security, Medicare and Medicaid, and examines several possible solutions to the potential problem.According to this Application, how will an increase in government spending on entitlement programs affect the macroeconomy?
A. It will increase aggregate demand. B. It will decrease aggregate demand. C. It will increase aggregate supply. D. It will decrease aggregate supply.
A commercial bank's reserves are:
A. liabilities to both the commercial bank and the Federal Reserve Bank holding them. B. liabilities to the commercial bank and assets to the Federal Reserve Bank holding them. C. assets to both the commercial bank and the Federal Reserve Bank holding them. D. assets to the commercial bank and liabilities to the Federal Reserve Bank holding them.
A 15-year old that wants a job but can't find one is
A. cyclically unemployed. B. not included at all in the unemployment rate. C. unemployed. D. underemployed.
Which of the following statements is FALSE?
A) When the relative price of a good falls, the substitution effect always leads the consumer to substitute more of that good for the other good. B) For a normal good, the income effect reinforces the substitution effect. C) For an inferior good, the income effect offsets the substitution effect. D) For an inferior good, the income effect is positive.