international economy Question 17: Which of the following is true of the relatio
ID: 1127844 • Letter: I
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international economy
Question 17: Which of the following is true of the relationship between the Marginal Propensi Consume (MPC) and the Marginal Propensity to Save (MPS)? a. The MPC can be equal to one, and the MPS e b. Sometimes the MPC and MPS sum to a number greater t ty to qual to 0, if the economy is very poor high There is no consistent relationship between differ too much among d reater than 1 if the GDP growth rate is very c. the MPC and the MPS because savings rat d. The MPS ifferent income segments of the economy always has a positive value (there is always a savings rate in an economy) and the MPC is always less than one uestion 18: Given that the balanced budget multiplier is equal to 1, what happens to the national nomy when the government increases its share of national incomes, increasing both spending eco and taxes so that the government sector grows but it grows without creating new deficits? This strategy will lower national incomes because the private sector is more productiv than the government sector, and increasing the government sector will hurt nationa productivity in the long run This strategy will expand national incomes because the increase in spending will increase GDP by more than the increase in taxes will reduce GDP This strategy should have no effect on national incomes because only a budget deficit or budget surplus will help or hurt the economy a. b. c. 19: In calculating the National Income and Product Accounts, we subtract Capital mption Allowan ce (also known as Depreciation) from Gross Domestic Product in order to separate Domestic Product. What is the purpose of measuring Net Domestic Product as a rement from GDP? epreciation represents a deduction from GDP, so Net Domestic Product is larger than Gross Domestic Product when depreciation is taken out, and this gives a more accurate picture of total investment within the economy Depreciation does not reflect actual payments of income being made to persons within the economy; it is just a way of spreading the cost of capital over the useful life of the capital. S Net Domestic Product is a more accurate measure of national incomes Depreciation reflects the earnings from production facilities located in foreign countries, s Net Domestic Product reflects only production that takes place within the country whose GDP is being measured Depreciation reflects investment in "replacement capital," and by subtracting it out we ca isolate the investment that remains as investment in capital for growth b. d. Question 20: What is the best description of the relationship between the Consumption Functio Sa vings Function, and Investment Function in macroeconomic theory? a. Consumption is a function of the general price level, while Savings and Investment are functions of the interest rate Consumption and Savings are functions of National Income, while Investment is a funct b. xpected Profits, given the interest rate Consumption and Savings are functions of the general price level, while Investment i function of National Income Consumption and Savings are functions of National Income, while Investment is a funo of the interest rate d.Explanation / Answer
17. A
Explanation: When a country is very people, people might spend all their income on basic needs such is foods. Therefore, the saving can be zero. In that case, MPC = 1 and MPS = 0. So, Option A is valid.
The sum of MPC and MPS cannot be greater than 1. So, option B is invalid.
There is a consistent relationship between MPC and MPS, which is MPS + MPC = 1. So, option C is also invalid.
MPC can be equal to 1 when there is no saving and all income is spent on consumption. So, option D is also invalid.
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