If the marginal propensity to consume (MPC) is 0.96, the value of the spending multiplier is:
a. 25.
b. 40.
c. 96.
d. 100.
a
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In a private closed economy (an economy with only a private sector and no international trade), the equilibrium condition for the economy is
A. C + Ig + G + NX = Y. B. AE = C + Ig + G = Y. C. AE = G + Ig = Y. D. AE = C + Ig = Y.
A free rider problem arises when
a. there are very few beneficiaries and exclusion of any one of them is possible. b. there are many beneficiaries and exclusion of any one of them is possible. c. there are many beneficiaries and exclusion of any one of them is impossible. d. there are very few beneficiaries and they all try to use the good simultaneously.
Exhibit 12-9 Negative Income Tax
?
As shown in Exhibit 12-9, a family of four does not pay income taxes at:
A. an income of $25,000. B. any income between zero and $20,000. C. all levels of income. D. any income above $20,000.
Suppose the price level is fixed, the MPC is .8, and the GDP gap is a negative $200 billion. To achieve full-employment output (exactly), government should:
A. increase government expenditures by $200 billion. B. reduce taxes by $200 billion. C. increase government expenditures by $40 billion. D. reduce taxes by $160 billion.