\What are the marginal propensity to consume (MPC) and the marginal propensity to save (MPS)? How is the MPC related to the consumption function?
The marginal propensity to consume is the change in consumption divided by the change in disposable income. The marginal propensity to save is the change in saving divided by the change in disposable income. The MPC measures the slope of the consumption function and is constant along a linear consumption function.
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A reason that the inflation rate did not increase substantially following the recession of 2007-2009 is that
A) the increase in the monetary base was accompanied by larger-than expected increases in the money supply. B) even though the recovery was slow, the U.S. economy benefitted from a small output gap. C) the recovery was slow and the unemployment rate remained high through 2012. D) the Federal Reserve quickly implemented contractionary policy to prevent an increase in the inflation rate.
In general, the structure of a business firm
A) looks like a market. B) looks like a flat network. C) is largely determined by legal considerations. D) seems more like a central planning agency than a market.
The inflation and unemployment rates experienced during the 1960s seemed to indicate that the economy was operating on the vertical segment of the aggregate supply curve
Indicate whether the statement is true or false
Any imperfection in the market mechanism that prevents optimal outcomes is known as
A. Market failure. B. Government failure. C. Public cost. D. External cost.