Questions About Economics Question 1 Which one of the following shifts in the ag

Question

Questions About Economics

Question 1 Which one of the following shifts in the aggregate demand curve? a. Government increases investment by building more houses Ob. Due to failure to win Eurovision, Irish consumers spend all their free time staring at the tele rather than consuming Oc. A global recession occurs, and incomes decrease Od. The government finds a leprechaun's pot of gold, and incomes increase Question 2 Suppose that, without taxation, MPC = 0.7. If taxation is introduced, where t-0.1, what is the new slope of the consumption function? a. 0.7 b.0.1 c.0.9 d, 0.63 e. 0.07

Explanation / Answer

Ans:

1) Option A

Government increases investment by building more houses

The increase in the government spending increases the aggregate demand and the aggregate demand curve will shift to right.

2) Option D - 0.63

The introduction of the tax will decrease the marginal propensity to consume and the slope of the consumption function is

MPC = 0.7 - (0.7*0.1)

= 0.63

3) Option B

Is composed of three parts health ,education and income

Satisfaction with Life Index is created using metastudy of aspects such as health,wealth and education.

4) Option E - 25%

= (CPI 2008 - CPI 2007) / CPI 2007

= (250 - 200) / 200

= 50 / 200

= 0.25 or 25%

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