. If the Marginal Propensity to Consume is 80%, the Marginal Propensity to Save
ID: 1232318 • Letter: #
Question
. If the Marginal Propensity to Consume is 80%, the Marginal Propensity to Save is ______________ and the income multiplier is ________________.
. Laissez faire economists asserted that inflationary gaps and recessionary gaps:
a. Would never occur even temporarily
b. May occur, but would be eliminated by self-correcting mechanisms internal to the economy
c. May occur, but would be eliminated by government economic policy
d. Occur naturally and would not be eliminated or corrected by either internal mechanisms or by government policy.
An increase in individual income taxes, ceteris paribus:
a Raises aggregate expenditure by raising disposable income, thereby increasing consumption
b Has no effect on aggregate expenditure
c Lowers aggregate expenditure by lowering disposable income, thereby increasing consumption
d Lowers aggregate expenditure by lowering disposable income, thereby decreasing consumption
. To eliminate a recession, Congress could use ________ fiscal policy, and to eliminate inflation, Congress could use _________ fiscal policy.
a. contractionary; expansionary
b. expansionary; contractionary
c. expansionary; expansionary
d. contractionary; contractionary
26. According to a Phillips Curve, which of the following is a correct statement about the relationship between inflation and unemployment?
a. In the short run, reducing inflation is associated with rising unemployment
b. In the short run, reducing inflation is associated with falling unemployment
c. In the short run, there is no relationship between inflation and unemployment
d. In the short run, unemployment and inflation are related directly since both increase together
27. True or False. One of the fundamental problems in sustaining benefits under the Social Security program is that the ratio of workers to retirees has fallen and is projected to fall even further.
28. Which set of changes would increase Aggregate Demand ?
a.. All of the following would
b. U.S. business taxes decline and incomes in the rest of the world increase
c. In the U.S., wealth increases and individuals expect higher future incomes
d. The U.S. dollar depreciates, and there is a reduction in the price of OPEC oil
29. Which of the following is NOT a transfer payment?
a. A government payment for a national forest ranger
Explanation / Answer
. If the Marginal Propensity to Consume is 80%, the Marginal Propensity to Save is _____20%_________ and the income multiplier is ____1/0.8 = 1.25____________. . Laissez faire economists asserted that inflationary gaps and recessionary gaps: (a) An increase in individual income taxes, ceteris paribus: (d) . To eliminate a recession, Congress could use ________ fiscal policy, and to eliminate inflation, Congress could use _________ fiscal policy. (b) 26. According to a Phillips Curve, which of the following is a correct statement about the relationship between inflation and unemployment? (a) 27. True or False. One of the fundamental problems in sustaining benefits under the Social Security program is that the ratio of workers to retirees has fallen and is projected to fall even further. True. 28. Which set of changes would increase Aggregate Demand ? (d) 29. Which of the following is NOT a transfer payment? (d) 30. An increase in individual income taxes, ceteris paribus: (d)
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