If the marginal propensity to save (MPS) is 0.25, the value of the spending multiplier is:
A. 1.
B. 2.
C. 4.
D. 9.
Answer: C
You might also like to view...
Suppose we are working with the simplest possible Keynesian-cross multiplier, but with the permanent-income hypothesis figured in. If k = 0.88,
and j = 0.25, the multiplier of a $1 change in government spending goes from ________ in the short run to ________ in the long run. A) 8.33, 1.28 B) 1.28, 8.33 C) 8.33, 4.00 D) 1.13, 4.00 E) 4.54, 8.33
Refer to Scenario 2.1. What is the equilibrium price of books?
A) 5 B) 10 C) 15 D) 20 E) none of the above
Using Figure 1 above, if the aggregate demand curve shifts from AD2 to AD3 the result in the short run would be:
A. P1 and Y2. B. P2 and Y3. C. P3 and Y1. D. P2 and Y2.
The self-correcting tendency of the economy means that rising inflation eventually eliminates:
A. unemployment. B. exogenous spending. C. recessionary gaps. D. expansionary gaps.