Congratulations. You’ve been appointed economic adviser to Happyland. Your resea

Question

Congratulations. You’ve been appointed economic adviser to Happyland. Your research assistant says the country’s mpe is 0.5 and autonomous expenditures have just risen by $33.

Instruction: Round your answers to the nearest the whole dollar amount.

a. What will happen to income?

Income will (Click to select) increase/decrease by $.

b. Your research assistant comes in and says he’s sorry but the mpe wasn’t 0.5; it was 0.4. How does your answer change?

The income will (Click to select) increase/decrease by only $.

c. He runs in again and says exports have fallen by $28 and investment has risen by $28. How does your answer change?

A. It doesn’t. The increase in investment cancels out the decrease in exports.

B. Income will increase by $61.

C. Income will increase by $56.

D. Income will increase by $84.

Explanation / Answer

Change in income= 1/1-mpe* change in spending

a) 1/(1-0.5)*33= 66

Income will increase by 66.

b) 1/(1-0.4)*33= 55

Income will increase by only 55.

c) A is correct

Increased in investment cancels out decrease in exports. Income remains same.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.