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Economics
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26 Nov 2019

The marginal propensity to consume is given by

the change in consumption divided by the change in saving.

the change in consumption divided by the change in disposable personal income.

consumption divided by the change in disposable personal income.

consumption divided by disposable income.

The interest rate on a bond is

inversely related to its price.

directly related to its price.

determined by its face value.

determined by the time to maturity.

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Elin Hessel
Elin HesselLv2
19 Feb 2019
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Related textbook solutions

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Related questions

True or False, if false explain.

1. Saving is defined simply as disposable income minus consumption.

2. If the consumption function has a slope of 4/5, then the saving function must have a slope of .2.

3. Any factor that would shift the consumption function upward would shift the saving function upward also.

4. The average propensity to consume (APC), like the MPC, is simply the slope of the basic, Keynesian consumption function.

5. Given a typical shaped consumption function, as the level of income rises, the APC rises as well.

6. If a consumption function graphically starts at a point above the origin (i.e., has a positive vertical axis intercept), then the saving function must begin below the origin.

7. A dramatic rise in household inflationary expectations could be expected to shift the consumption function downward and the saving function upward.

(Answer the following questions based on the given data.)

**Please show work/formulas**

Consumption and Savings Schedule

Complete the following schedule (savings, APC, APS, MPC, & MPS):

DI C S APC APS MPC MPS
240 244
260 260
280 276
300 292
320 308
340 324
Key: DI = Disposable Income, C=Consumption, S=Saving, APC = Average Propensity to Consume, APS=Average Propensity to Save
MPC=Marginal Propensity to Consume, MPS=Marginal Propensity to Save
2. What are the 2 main tools the government can use with fiscal policy?
3. What is the goal of expansionary fiscal policy and how is it achieved?
4. What is the current level of total public debt for the United States, and what percent is foreign-owned?

1. The multiplier helps explain

Ā  Ā 

A. why a decrease in taxes causes real Gross Domestic Product (GDP) to fall by more than the amount of the decrease in taxes.
Ā  Ā 

B. why a fall in investment cause real Gross Domestic Product (GDP) to rise by more than the amount of the decrease in investment.
Ā  Ā 

C. why a rise in government expenditures causes real Gross Domestic Product (GDP) to rise by more than the amount of the increase in government spending.
Ā  Ā 

D. why an increase in disposable income causes real Gross Domestic Product (GDP) to rise by less than the amount of the increase in disposable income.

Ā 

2. If the marginal propensity to save (MPS) increases, the multiplier

Ā  Ā 

A. decreases.
Ā  Ā 

B. can either increase or decrease, depending on what happens to the marginal propensity to consume (MPC).
Ā  Ā 

C. stays the same.
Ā  Ā 

D. increases.

Ā 

QUESTION 60

The investment function will shift when there is a change in

Ā  Ā 

A. the opportunity cost of retained earnings.
Ā  Ā 

B. firms' profit expectations.
Ā  Ā 

C. the cost of borrowing.
Ā  Ā 

D. the interest rate.

1.43 points

QUESTION 61

In the Keynesian model, whenever planned saving exceeds planned investment,

Ā  Ā 

A. there will be unplanned inventory accumulation.
Ā  Ā 

B. real GDP will not be influenced.
Ā  Ā 

C. the interest rate will remain unchanged.
Ā  Ā 

D. there will be unplanned inventory depletion.

Ā 

1.43 points

QUESTION 62

In the Keynesian model, whenever planned saving is less than planned investment,

Ā  Ā 

A. there will be unplanned inventory depletion.
Ā  Ā 

B. the interest rate will remain unchanged.
Ā  Ā 

C. there will be unplanned inventory accumulation.
Ā  Ā 

D. real GDP will not be influenced.

Ā 

1.43 points

QUESTION 63

Government purchases

Ā  Ā 

A. are determined by the political process.
Ā  Ā 

B. are determined by the public.
Ā  Ā 

C. are influenced by interest rates.
Ā  Ā 

D. are determined by suppliers.

Ā 

1.43 points

QUESTION 64

If, at some level of output, total planned real expenditures are less than real Gross Domestic Product (GDP),

Ā  Ā 

A. real GDP will either fall or remain unchanged, depending on the MPC.
Ā  Ā 

B. real GDP will rise.
Ā  Ā 

C. real GDP remains unchanged.
Ā  Ā 

D. unplanned inventories will increase and real GDP will fall.

Ā 

1.43 points

QUESTION 65

When the economy is operating at the equilibrium level of GDP, we know that

Ā  Ā 

A. total planned real expenditures equal real GDP.
Ā  Ā 

B. real net exports equal inventory changes.
Ā  Ā 

C. planned real investment spending equals real net exports of zero.
Ā  Ā 

D. total planned real consumption expenditures equal real GDP.

Ā 

1.43 points

QUESTION 66

One divided by the marginal propensity to save (MPS) is the formula for

Ā  Ā 

A. the inverse of the multiplier.
Ā  Ā 

B. the multiplier.
Ā  Ā 

C. one minus the multiplier.
Ā  Ā 

D. autonomous consumption.

Ā 

QUESTION 67

Thinking like an economist would, which is true of investment?

Ā  Ā 

A. Investment represents spending on capital goods.
Ā  Ā 

B. Investment is a stock concept.
Ā  Ā 

C. Investment is putting money into stocks and bonds.
Ā  Ā 

D. It is the portion of disposable income that is not used for consumption or saving.

Ā 

QUESTION 68

Other things being equal, if input prices rise in a country, then there would be

Ā  Ā 

A. cost-push inflation.
Ā  Ā 

B. demand-pull inflation.
Ā  Ā 

C. cost-pull deflation.
Ā  Ā 

D. more production and a lower price level.

Ā 

QUESTION 69

In the short run, if the price level rises, then the overall economy can temporarily produce beyond its nominal capacity. One reason for this is that

Ā  Ā 

A. existing capital equipment can be used more intensively.
Ā  Ā 

B. wage rates rise almost simultaneously with the price level.
Ā  Ā 

C. the unemployment rate usually rises dramatically along with the price level.
Ā  Ā 

D. workers can be switched from counted to uncounted production.

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