What are the marginal propensity to consume (MPC) and the marginal propensity to save (MPS)? How is the MPC related to the consumption function?
What will be an ideal response?
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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Explain how the Fed increases the money supply when it buys bonds in the open market
What will be an ideal response?
Which of these statements about the productivity of resources is true?
a. While labor can become more productive, natural resources cannot. b. Less productive resources result in more sustainable economic growth. c. Capital, labor, and natural resources can all become more productive. d. It is not possible to make a resource more productive.
The egalitarian principle says
A. that the age-earnings cycle should determine income. B. that people should be compensated on the basis of what they produce. C. that everyone should have exactly the same income. D. that people should be compensated on the basis of their need.
If consumption is $60,000 when income is $80,000, and consumption increases to $68,000 when income increases to $90,000, the MPC is
A. 0.2. B. 0.4. C. 0.6. D. 0.8.