Suppose policy makers want to increase GDP by $450 billion. If the marginal propensity to consume is 0.9, by how much must government spending increase to achieve this target?
What will be an ideal response?
The multiplier would be 10 in this case, so government spending must increase by $45 billion.
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How does a reduction in the price level affect the position of the C + I + G + X curve and in turn the equilibrium level of real GDP?
A) The C + I + G + X curve shifts down, thereby reducing the equilibrium level of real GDP. B) The C + I + G + X curve shifts down, thereby increasing the equilibrium level of real GDP. C) The C + I + G + X curve shifts up, thereby reducing the equilibrium level of real GDP. D) The C + I + G + X curve shifts up, thereby increasing the equilibrium level of real GDP.
A nation can accelerate economic growth by increasing its production of consumer goods
a. True b. False Indicate whether the statement is true or false
In general we can note that households with lower wealth tend to have a ____ MPC relative to wealthier households.
A. lower B. higher C. similar D. exactly equivalent
Which of the following is NOT a likely market solution to the lemons problem?
A. product certification B. average cost pricing C. industry standard D. product warranty