An initial increase in investment spending will generate:
a. More of an increase in income than the initial increase because of the multiplier effect
b. Less of an increase in income than the initial increase because of the multiplier effec
c. Less of an increase in income than the initial increase because of the net export effect
d. More of an increase in income than the initial increase because of the net export effect
Answer: a. More of an increase in inome than the initial increase because of the multiplier effect
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In some markets consumers may buy many different brands of a product. Which of the statements below best represents a situation where demand for a particular brand would be very elastic?
A. "The brand I buy is so superior to other available brands that I hardly consider the others." B. "I use so little of that product that when I do buy it, I don't pay much attention to the price." C. "The different brands are almost identical. I always buy the cheapest." D. "I pinch pennies in buying other products, but like most people I feel I owe it to myself to get the best brand of this product."
A . If aggregate expenditure falls by $5 million, and the MPC is 0.8, explain the process that will drive the economy to a new equilibrium level. b. What will be the final result of this initial change?
Ronald Reagan believed that reducing income tax rates would
a. do little, if anything, to encourage hard work. b. result in large increases in deadweight losses. c. raise economic well-being and perhaps even tax revenue. d. lower economic well-being, even though tax revenue could possibly increase.
Refer to the accompanying figure. Suppose the dairy lobby convinces the government to impose price controls in this market. If the government requires cheese to be sold for a price of $8 per pound, then, relative to before the price controls, total consumer surplus in the market would:
A. decrease. B. not change. C. increase. D. increase and then decrease.