Assume that in 2015, the following prevails in the Republic of Nurd: Government spending (G) = $0 Net taxes (T) = $0 Planned investment (1) = $30 Income (Y) = $200 Assume that households of Nurd consume 80 percent of their income; they save 20 percent of their income. In other words, MPC = 0.80 and MPS = 0.20. Thus, the consumption function and saving function are: Y-T C=0.80Y and S=0.20Yd, where disposable income Y At the current level of income (Y= $200). OA. leakages (S+T) fall short of injections (I + G) and income will increase in the coming months. OB. leakages (S+ T) equal injections (I + G) and income will remain unchanged in the coming months. OC. leakages (S+T) exceed injections (I + G) and income will increase in the coming months. OD. leakages (S+T) exceed injections (1+ G) and income will fall in the coming months. 4
Assume that in 2015, the following prevails in the Republic of Nurd: Government spending (G) = $0 Net taxes (T) = $0 Planned investment (1) = $30 Income (Y) = $200 Assume that households of Nurd consume 80 percent of their income; they save 20 percent of their income. In other words, MPC = 0.80 and MPS = 0.20. Thus, the consumption function and saving function are: Y-T C=0.80Y and S=0.20Yd, where disposable income Y At the current level of income (Y= $200). OA. leakages (S+T) fall short of injections (I + G) and income will increase in the coming months. OB. leakages (S+ T) equal injections (I + G) and income will remain unchanged in the coming months. OC. leakages (S+T) exceed injections (I + G) and income will increase in the coming months. OD. leakages (S+T) exceed injections (1+ G) and income will fall in the coming months. 4
Chapter18: The Keynesian Model
Section: Chapter Questions
Problem 9SQP
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Which option is the correct answer?
Transcribed Image Text:Assume that in 2015, the following prevails in the Republic of Nurd:
Government spending (G) = $0
Net taxes (T) = $0
esc
Planned investment (1) = $30
Income (Y) = $200
Assume that households of Nurd consume 80 percent of their income; they save 20 percent of their income. In other words, MPC = 0.80 and MPS = 0.20. Thus, the consumption function and saving function are:
C=0.80Y and S=0.20Yd, where disposable income Y = Y-T
At the current level of income (Y= $200),
O A. leakages (S + T) fall short of injections (1+G) and income will increase in the coming months.
OB. leakages (S+T) equal injections (1 + G) and income will remain unchanged in the coming months.
OC. leakages (S+T) exceed injections (1 + G) and income will increase in the coming months.
OD. leakages (S+ T) exceed injections (1 + G) and income will fall in the coming months.
/
Click to select your answer.
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