Principles of Macroeconomics (12th Edition)
12th Edition
ISBN: 9780134061115
Author: CASE
Publisher: PEARSON
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Question
Chapter 8, Problem 5.4P
To determine
Effect of increase in savings on MPC, MPS, multiplier and the output.
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Students have asked these similar questions
Suppose that when disposable income decreases by $2,000, consumption spending increases by $1500. Given this information, we know that the marginal propensity to consume (MPC) is:
OPTIONS:
1/.25 = 4.
$1,000/$750 = 1.33.
75.
25.
Which one of the following statements relating to marginal propensity to consume is INCORRECT?
(a)
Marginal propensity to consume for a given consumption function is usually less than 1;
(b)
If the people in a country save 30c out of every rand they earn, the marginal propensity to consume in this country is said to be 0.7;
(c)
If the marginal propensity to consume is given as 0.622, then the value of the simple multiplier will be 2.5;
(d)
The larger the value of the marginal propensity to consume, the steeper the consumption function will be.
If planned investment spending increases by $6 million, and consumers are likely to spend 80¢ for every dollar of disposable income they earn, how much will equilibrium output increase by
a.
$30 million
b.
$7.5 million
c.
$6 million
d.
$5 million
e.
$4.8 million
Chapter 8 Solutions
Principles of Macroeconomics (12th Edition)
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Similar questions
- If the multiplier coefficient is 5, by what amount does real GDP output have to increase or decrease in order to restore equilibrium if investment spending increases by $4 billion? A) 10 billion decrease. B) 9 billion increase. C) 20 billion increase. D) 1 billion decrease.arrow_forwardChoose the correct answer: . If consumption is $25,000 when income is $26,000, and consumption increases to $25,900 when income increases to $28,000, the marginal propensity to consume is: 0,59. (B) 0.65. (C) 0.55. (D) 0.45. 2) Suppose consumption is $10,000 when income is $9,000 and the marginal propensity to save equals 0.1. When income increases to $9,500, consumption will be: $8,500. (B) $10,450. (C) $10,500. (D) $10,050.arrow_forward
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