In an economy with no income taxes or imports, the marginal propensity to consume is 0.80. The expenditure multiplier is
A) 1.25. B) 10.0. C) 0.80. D) 5.00. E) 0.20.
D
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A mixed economy blends private and public elements.
Answer the following statement true (T) or false (F)
An increase in production possibilities is known as
A. Predictable growth. B. Factor expansion. C. Economic growth. D. Upward mobility.
One drawback in using fiscal policy as a stabilization tool is that fiscal policy:
A. effects are frequently offset by automatic stabilizers. B. affects potential output as well as planned aggregate expenditure. C. is too flexible to use to close output gaps. D. is not useful for dealing with prolonged episodes of recession.
In Macroland, currency held by the public is 2,000 econs, bank reserves are 300 econs, and the desired (and current) reserve/deposit ratio is 15 percent. If commercial banks borrow 100 econs in reserves from the Central Bank through discount window lending, then the money supply in Macroland will ________, assuming that the public does not wish to change the amount of currency it holds.
A. increase to 3,133 econs B. increase to 4,100 econs C. decrease to 1,900 econs D. increase to 4,667 econs