Differentiate between an induced increase in consumption and an autonomous increase in consumption. How are they represented on a graph?
An induced increase in consumption is an increase in consumer spending that stems from an increase in consumer incomes. It is represented on a graph as a movement along a fixed consumption function.
An autonomous increase in consumption is an increase in consumer spending without any increase in consumer incomes. It is represented on a graph as a shift of the entire consumption function.
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If the firm is able to reduce MC from MC0 to MC1 the firm will produce at point ________ on the new demand curve and lower price to ________
A) E1; P1 B) E0; P0 C) E2; P2 D) E0 or E1; P0
If a good has an absolute price elasticity of 1, the demand for the good is
A) unit elastic. B) inelastic. C) perfectly elastic. D) elastic.
When the exchange rate fluctuates around a fixed central target, allowing for a moderate amount of fluctuation, while tying the currency to the target central rate, the exchange rate is under:
a. a horizontal band. b. a crawling peg. c. a managed float. d. an independent float. e. a currency board.
If national income is $100 billion, and MPC = 0.75, then autonomous consumption is ________ and MPS is ___________
a. $25 billion; 0.25 b. $75 billion; 0.75 c. unknown; 1.25 d. unknown; 0.25 e. $75 billion; 0.25