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
D
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If the difference between the marginal benefit and the marginal cost of a good is as large as possible,
A) resources are being used with maximum efficiency. B) resources would create more value producing other goods and hence the production of this good should be decreased. C) more of the good should be produced. D) allocative efficiency has been attained. E) Both answers A and D are correct.
The business cycle is the
A) regular growth rate of the real GDP. B) regular fluctuations of real GDP below potential GDP. C) irregular fluctuations of prices around real GDP. D) irregular fluctuations of real GDP around potential GDP.
When the economy heads into a recession, automatic stabilizers cause
A. taxes and government spending to rise. B. the government budget deficit to increase. C. taxes and government spending to fall. D. national income to increase.
Based on our understanding of the model presented in Chapter 3, we know that a reduction in c1 (where C = c0 + c1YD) will cause
A) the ZZ line to become steeper and a given change in autonomous consumption (c0 ) to have a smaller effect on output. B) the ZZ line to become steeper and a given change in autonomous consumption (c0 ) to have a larger effect on output. C) the ZZ line to become flatter and a given change in autonomous consumption (c0 ) to have a smaller effect on output. D) the ZZ line to become flatter and a given change in autonomous consumption (c0 ) to have a larger effect on output.