Suppose the marginal propensity to consume is 0.8. According to the model in the text, how much would equilibrium output go up if the government increased spending by $500 million (assuming all other factors are held constant)?
Select one:
a. $400 million
b. $625 million
c. $900 million
d. $2,500 million
d. $2,500 million
You might also like to view...
A monopolistically competitive firm is producing an output level where marginal revenue is greater than marginal cost. What should this firm do to increase its profit or reduce its losses?
A) The firm should increase its implicit costs. B) The firm should lower its price. C) The firm should decrease its fixed costs. D) The firm should raise its price.
The conditions for a valid instruments do not include the following:
A) each instrument must be uncorrelated with the error term. B) each one of the instrumental variables must be normally distributed. C) at least one of the instruments must enter the population regression of X on the Zs and the Ws. D) perfect multicollinearity between the predicted endogenous variables and the exogenous variables must be ruled out.
An illustration of a non-credible commitment is the promise
a. to not increase capacity in a declining industry b. to match a new entrant's discount price c. to enter a profitable industry d. to restrain output to the quota assigned by a cartel e. to exit in the face of projected losses.
Because a bank has a very large pool of buyers and savers, it can:
A. act as an intermediary between firms and government. B. provide liquidity to some individuals that deposit funds. C. diversify the risk of saving and borrowing for individuals. D. act in the best interest of society by ensuring there is enough money for people.