1) If the expenditures function AE = AEO + mpe Y, induced expenditures are given

Question

1) If the expenditures function AE = AEO + mpe Y, induced expenditures are given by:

a) AEO

b) AEO + Y

c) mpe Y

d) Y

2) If autonomous expenditures equal $600 and the mpe is 0.80, then equilibrium income in the multiplier model will be $3000. True or False?

3) In the market for loanable funds, we are describing:

a) long term financial assets, such as mortgages and government bonds

b) short term financial assets, such as money

c) short term financial assets, such as savings deposits and checking accounts

d) the money market

Explanation / Answer

1.c

2. Y = AEO/(1-mpe) = 600/(1-.8) = $300, TRUE

3. a)

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