If aggregate expenditures increase by $12 billion and equilibrium GDP consequently increases by $48 billion, then the marginal propensity to save in the economy must be:
A. 0.75
B. 0.25
C. 0.8
D. 0.2
B. 0.25
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Suppose the economy is initially operating at full employment. A fiscal policy action that results in an increase in the size of the budget deficit will cause which of the following in the long run?
A) an increase in real GDP. B) have no effect on both the level and composition of real GDP. C) a reduction in the price level. D) change the composition of real GDP.
Conservative economists would like to help younger workers get work experience by
A. setting up a government jobs program. B. raising the minimum wage rate. C. lowering the minimum wage rate. D. passing a law requiring employers to hire teenagers ahead of older workers who are equally qualified.
When one observes consumption and investment patterns over time, one finds that:
A. like consumption, investment is fairly stable over time. B. like consumption, investment is fairly erratic over time. C. unlike consumption, which is fairly stable over time, investment is subject to erratic fluctuations. D. unlike consumption, which is subject to erratic fluctuations, investment is fairly stable over time.
Refer to the table. Suppose that the transactions demand for money is $300 billion and the money supply is $700 billion. A decrease in the money supply to $600 billion would cause the interest rate to:
A. Rise to 7 percent
B. Rise to 6 percent
C. Fall to 4 percent
D. Fall to 5 percent