Suppose income grows from $10,000 to $10,400, and consumption rises from $8,000 to $8,300. This implies that:
A. the average propensity to consume is 75%.
B. the average propensity to save is 75%.
C. the marginal propensity to save is 75%.
D. the marginal propensity to consume is 75%.
The marginal propensity to consume:
A. is equal to the multiplier
B. moves in the opposite direction of the multiplier
C. moves in the same direction as the multiplier
D. has no relationship with the multiplier
E. Both A and C
If the multiplier is equal to 4 and the government increases taxes by $200, equilibrium income will:
A. fall by $200.
B. fall by $800.
C. fall by $400.
D. fall by $600.
Which of the following would NOT explain a change in aggregate demand?
A. increase in productivity
B. increase in consumer spending
C. appreciation in the value of the currency
D. changes in net export spending
Which of the following would NOT explain a chance in aggregate supply?
A. changes in government spending
B. increase in productivity
C. change in resource prices
D. increase in business taxes
If the economy is near full-employment, a short-run increase in GDP will:
A. lead to a fall in wage rates
B. lead to a fall in the aggregate price level
C. lead to a rise in the aggregate price level
D. have no impact on prices or wages