Answer the following statements true (T) or false (F)
1. In the multiplier formula, 1/MPS equals the multiplier.
2. If the MPC is five-sixths, the size of the multiplier is 6.
3. If planned investment decreases, the multiplier will decrease the equilibrium income.
4. Various estimates of the multiplier for the U.S. economy place it between 2 and 3, depending on the level of employment.
5. The classical doctrine assumed that the normal equilibrium position for the economy was at full employment.
1. TRUE
2. TRUE
3. TRUE
4. TRUE
5. TRUE
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Which of the following statements about economic analysis is true?
A) Unlike positive economic analysis, normative economic analysis can be tested. B) There is much more disagreement among economists over normative economic analysis than over positive economic analysis. C) Normative economic analysis is concerned with "what is," whereas positive economic analysis is concerned with "what ought to be." D) Economics is primarily about normative analysis, which measures the costs and benefits of different courses of action.
Trade between countries is based on
A) absolute advantage only. B) monopoly power. C) comparative advantage. D) none of these choices.
If profit-seeking entrepreneurs are going to be successful, they must
a. produce a product that the consumers value more than the resources required for its production. b. produce the product more cheaply than their rivals regardless of quality. c. maximize the salaries of high-level management so they will be able to attract people who will work hard. d. charge a higher price than their competitors so they can make economic profits in the long run.
Consider two countries, Estonia and Ukraine. Estonia devotes a larger portion of its production to capital. All other things equal, which of the following statements is most likely true?
A. Ukraine is producing inside its production possibility frontier, whereas Estonia is producing at a point on its production possibility frontier. B. Estonia will move up its production possibility curve faster than Ukraine. C. Estonia's production possibility frontier will shift up and out farther and faster than Ukraine's. D. Estonia is a poorer country than Ukraine.