Assume that there is a $20 billion increase in government purchases. If MPC = 0.8, the sum of the indirect effect on aggregate demand through induced additional consumption purchases is equal to:
a. $16 billion
b. $20 billion.
c. $80 billion.
d. $100 billion.
c
You might also like to view...
An article in the Wall Street Journal noted the following: Instead of relying on a full-coach, round-trip unrestricted fare of about $2,000 between Cleveland and Los Angeles
Continental [Airlines] since June has offered a $716 unrestricted fare in that market .... Through October, the test resulted in about the same revenue that Continental thinks it would have collected with its higher fare. Source: Scott McCartney, "Airlines Try Cutting Business Fares, Find They Don't Lose Revenue," Wall Street Journal, November 22, 2002. What is the absolute value of the price elasticity of demand on this airline route? A) less than 1 B) approximately 1 C) greater than 1 D) 0
Any increase in the present value of taxes implies
A) an increase in lifetime wealth and an increase in the current labor supply. B) an increase in lifetime wealth and a decrease in the current labor supply. C) a decrease in lifetime wealth and an increase in the current labor supply. D) a decrease in lifetime wealth and a decrease in the current labor supply.
The primary function of the International Monetary Fund is
A) to provide loans only to private firms in developing countries. B) to make direct, irrevocable transfers of funds from wealthy nations to poor nations. C) to lend solely on the basis of a nation's relative poverty. D) to make loans aimed at promoting global stability and hence growth.
A corporation may be reluctant to raise capital by issuing stock because
A. issuing stock to obtain money for investment is riskier than selling bonds. B. holders of already-existing stock will gain more voting power in the corporation. C. obtaining government permission to issue stock can be time-consuming and expensive. D. All of these responses are correct.