The marginal propensity to consume (MPC)
A. is greater than 1 only if the marginal propensity to save is greater than 1.
B. shows how much of an extra dollar of real disposable income is spent.
C. shows how much real disposable income changes when consumption falls.
D. shows the percentage of real disposable income consumed at each level of income.
Answer: B
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Suppose the economy currently has an inflationary ga
A) decrease aggregate demand, decrease prices, and decrease real GDP. B) increase short-run aggregate supply, decrease prices and increase real GDP. C) increase short-run aggregate supply, decrease in prices and decrease in real GDP. D) decrease aggregate demand, decrease prices, and increase real GDP.
In Figure 4-9 above, suppose LMA shifts to LMB. The distance from points A to L tells us
A) the change in income given zero interest responsiveness of Ap. B) the change in income resulting from the interest rate falling to its value at point B?. C) how much the money supply increased in producing the LM shift. D) the change in income that by itself raises the demand for money by as much as the money supply rose.
In a model of the saving rate, which of these relationships is most crucial?
A) the effect of the saving rate on government spending B) the effect of government spending on the saving rate C) the effect of the saving rate on taxes D) the effect of taxes on the saving rate E) the effect of the saving rate on the real wage
If doubling the quantity of inputs more than doubles the quantity of outputs, the firm is experiencing
a. increasing returns to scale. b. decreasing returns to scale. c. constant returns to scale. d. increasing costs per unit of output.