(11) If the marginal propensity to consume = . 85 and taxes = 0, we know that co
ID: 1136762 • Letter: #
Question
(11) If the marginal propensity to consume = .85 and taxes = 0, we know that consumers typically save $.15 of each additional dollar of income they receive. true false
(12) Point A on the graph represents the
equality of capital expenditures and income. point where consumption equals income. competitive equilibrium. point where the marginal propensity to consume equals 0.
(13) According to the aggregate demand/aggregate supply curve, when prices rise, businesses will cut back spending. businesses will increase spending by the amount of the price increase. businesses will increase spending by an amount less than the price increase. business spending is unaffected.
(14) ___________ are leakages out of the circular flow model. Exports Government expenditures Taxes Business expenditures
(15) In the classical view, the macroeconomy is much like the market for apples in the sense that supply and demand will adjust to establish an equilibrium. true false
(16) During the Great Depression, output fell by 40% and unemployment hovered at 25%. According to the classical view of macroeconomics, what should have happened to reduce unemployment? Wages should have fallen, increasing demand for labor. Laborers should have switched industries, shrinking the ranks of the unemployed. The demand for jobs should have resulted in an increase in the supply of jobs. The excess supply of labor should have resulted in an increased demand for labor.
(17) Which of the following statements is not true about the aggregate expenditures model (AE = C + I + G + NX)? Consumer spending depends on consumer income. Foreign spending depends on the exchange rate. Government spending depends on the exchange rate. Business spending depends on the interest rate.
(18) If Sally’s consumption function is linear and her marginal propensity to consume is 0.8, this means that Sally’s total spending cannot exceed 80% of her income. Sally will spend at least 80% of her total income. Sally will not save money regardless of her income. Sally will begin to save at the point where her marginal income is equal to 0.8.
(19) If a household’s income increases from $50,000 to $60,000, and as a result, its consumption increases from $45,000 to $51,000, then what is the slope of its savings function? (Assume no taxes.) 0.6 0.15 0.85 0.4
(20) The graph shows aggregate expenditures as a function of income. Given the information in the graph, which of the following statements are true?
There is no autonomous spending. Business spending, government spending, and net exports are treated as autonomous spending. Aggregate expenditures do not vary with increasing income. Aggregate expenditures will fall to $0 when income falls to $0.
Explanation / Answer
11.
True
As per the given details, MPS = 1- PC = 1-.85 = .16
It means that of each $ income, $.15 is saved.
12.
B
At a point A, consumption becomes equal to the income.
13.
A
It happens because increased level of demand of money, will cause the interest rate to rise.
14.
Taxes
It reduces the income, hence it is considered as a leakage.
15.
True
A good output, will increase the supply of apple, and price will decrease. Then people will also demand more apple. It is according to the neo-classical model.
16.
A
Workers are unemployed and their supply will increase with decrease in wages. It will cause firms to demand more of labor and economy will slowly recover.
17.
C
Government spending does not depend upon the exchange rates. Rather, it is the fiscal policy, that drives government spending.
Pl. repost other unanswered questions for their proper answers!
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.