Assume that people experience a one-time 50 unit increase in their consumption (i.e. the intercept of the consumption function increases by 50). In this case
a. equilibrium income will rise by 50 units times the investment multiplier.
b. equilibrium income will rise by 50 units.
c. equilibrium income will rise by 50 units times the tax multiplier.
d. equilibrium income will not change because this increase is temporary.
A
You might also like to view...
The Glass-Steagall Act was designed to
A) legally separate investment banking from commercial banking. B) promote mergers in the banking industry. C) impose high capital ratios on investment banks. D) promote the interests of community banks.
The marginal rate of substitution
A) is minus the slope of the indifference curve. B) can be computed by measuring the curvature of the indifference curve. C) cannot be deduced from the properties of the indifference curve. D) can only be computed if we know the prices of all goods.
Suppose the nominal interest rate is 4 percent annually, and you deposit $1,000. Inflation in the economy throughout the year is 5 percent. At the end of the year, you have earned:
A. a real rate of return of 1 percent. B. an increase in your purchasing power. C. a nominal increase in your savings of $40. D. All of these statements are true.
Refer to the diagram for athletic shoes. The optimal output of shoes is:
A. Q 1 .
B. Q 2 .
C. Q 3 .
D. greater than Q 3