If households save $0.40 of each additional dollar of increased income and spend the rest, the expenditure multiplier will be
A) 1.67.
B) 2.5.
C) 4.
D) 6.
B
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Assume that the central bank increases the reserve requirement. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to real GDP and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. Real GDP rises, and nominal value of the domestic currency falls. b. Real GDP falls, and nominal value of the domestic currency rises. c. Real GDP rises, and nominal value of the domestic currency remains the same. d. Real GDP rises, and nominal value of the domestic currency rises. e. There is not enough information to determine what happens to these two macroeconomic variables.
Answer the following statement(s) true (T) or false (F)
1. You can often predict people’s behavior if you know what their incentives are. 2. Lower prices are negative incentives to producers but positive incentives to consumers. 3. Positive incentives are generally considered more effective than negative incentives. 4. An absolute advantage occurs when a person, a region, or country can produce a good or service at a lower opportunity cost than others.
In the circular economic flow diagram, households:
A. make consumption expenditures and pay for land, labor, and capital. B. receive money income and supply resources. C. make consumption expenditures and receive goods and services. D. buy resources and receive goods and services.
The experience of the high-growth Asian economies has brought attention to predictions about income inequality made by Kuznets. He predicted that at first income inequality would ________ as economies began to develop. In the HPAE's experience, it ________
A) rise; rose B) decrease; decreased C) rise; fell D) fall; rose