How do the marginal propensity to consume, the marginal propensity to import, and the income tax rate influence the multiplier?
What will be an ideal response?
The marginal propensity to consume, the marginal propensity to import, and the income tax rate all influence the magnitude of the multiplier. The multiplier is smaller when the marginal propensity to consume is smaller, when the marginal propensity to import is larger, and when the income tax rate is larger.
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If a price floor on coffee is set above the market-clearing price, then
A) the quantity of coffee demanded will decrease. B) the quantity of coffee supplied will increase. C) the quantity demanded for coffee will increase. D) Both A and B will occur E) none of the above will occur.
In an article, "Preparing for the Next Black Swan" (Wall Street Journal, Aug 21, 2010), the point is made that diversification may be insufficient in protecting one's portfolio during a "Black Swan" event. Why may this be true?
A) virtually all asset classes may decline at the same time B) investors may be unable to buy different assets during a "Black Swan" event C) some assets may rise while others decline during a "Black Swan" event D) Black Swan events are surprises and thus one cannot prepare for such an event.
Economic theory predicted that the price of a depletable resource would rise by 10 percent. In reality, the price fell by 5 percent. Which of the following events could explain this discrepancy?
A. Known reserves of the resource were depleted. B. The interest rate rose by 15 percent. C. Antitrust enforcement broke up a cartel among major suppliers of the resource. D. The government imposed an effective price floor.
The term "business cycle" refers to ________.
A) the periodic increases and decreases of the economy B) the periodic purchases of goods and services by the government C) the increases and decreases in the rate of inflation D) the periodic growth of the Federal Reserve system E) the periodic increases and decreases in the GDP due to seasonal factors