What is the marginal propensity to consume, and why is it always less than one?
What will be an ideal response?
The marginal propensity to consume (MPC) is the amount by which desired consumption rises when current income rises by one unit. The marginal propensity to consume is less than one because a part of any increase in current income is saved.
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Nancy's utility of wealth curve is given in the above figure. She is faced with a risky proposition which yields an income of $50 one-third of the time, $100 one-third of the time, and $150 one-third of the time. Her expected utility is
A) 100. B) 140. C) 150. D) 420.
Monetary policy is controlled by the U.S. Congress
Indicate whether the statement is true or false
Most macroeconomists agree that the fundamental issues facing an economy are
a. unemployment and inflation, and what should be done about them b. the economy's long-run equilibrium position and how to get there c. the quantity of money and its velocity d. the long-run Phillips curve and the Laffer curve and whether they generate conflicting outcomes e. government deficits and high taxes
A local government is considering a 10 percent tax on items A, B, and C. They want to tax only those goods for which the burden of the tax is lowest on suppliers. They know that the elasticity of supply of all the suppliers in question is about equal and have observed that when the price of A, B, and C rose 10 percent, total sales receipts for A and B rose 2 percent but declined 2 percent for C. From this information, they should:
A. tax A and B but not C. B. tax A, B, and C equally. C. tax C but not A and B. D. You need to know the volume of sales to determine the answer.