If your income increases from $40,000 to $48,000 and your consumption increases from $35,000 to $39,000, your marginal propensity to consume (MPC) is:
A. 0.20.
B. 0.40.
C. 0.50.
D. 0.80.
Answer: C
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Discretionary fiscal policy is best described as
A) a deliberate attempt to cause the economy to move to full employment and price stability more quickly than it might otherwise. B) a deliberate attempt to improve the functioning of free markets. C) an automatic change in income transfer payments to keep the economy at full employment. D) the design of a tax system that automatically stabilizes economic activity over time.
In the late 1980s, the health benefits of oat bran were widely advertised. If the price of oats increased 50%, causing the quantity of oats supplied to increase by 40%, then the price elasticity of supply was
A) 1.25. B) -1.25. C) -0.80. D) 0.80.
The return to any factor of production that is in fixed supply is called
A. pure rent. B. marginal product. C. demand. D. economic profit.
If labor supply is very elastic, the payroll tax is
A. borne mostly by the workers. B. split evenly between the employer and the workers. C. borne mostly by the employer. D. borne entirely by the employer.