Choose the correct answer. A.1 The marginal propensity for consumption shows us: A. the change in...

Choose the correct answer.

A.1 The marginal propensity for consumption shows us:

A. the change in consumption per unit of change in income.

B. the percentage of income consumed.

C. how income changes when consumption changes.

D. all of the above.
A.2 If in a period there is an unpredictable increase in demand, then:

A. the investment made will be equal to the desired investment.

B. the investment made will be greater than the desired investment.

C. the investment made will be less than the desired investment.

D. there will be an unwanted accumulation of stocks of goods.
A.3 In an economy where there is no state and foreign trade, when the marginal momentum for consumption is equal to 0.5, the investment multiplier is equal to:

A. 2. B. 1. C. 0.5. D. 0.

A.4 As a liquidity trap we call the situation where:

A. the interest rate is zero.

B. the interest rate is negative.

C. The demand for money is completely elastic.

D. none of the above.

Solutions

Expert Solution

Answer 1)A. the change in consumption per unit of change in income is revealed by the marginal propensity to consume.

Answer 2) B. the investment made will be greater than the desired investmentIf in a period there is an unpredictable increase in demand, then: the investment made will be greater than the desired investment.

Answer 3) A. 2

In an economy where there is no state and foreign trade, when the marginal momentum for consumption is equal to 0.5, the investment multiplier is equal to 2

Multiplier= 1/ 1- MPC

Multiplier==1/1- 0.5

Multiplier=1/.5

Multiplier=10/5

Multiplier=2

Answer - A. the interest rate is zero.

As a liquidity trap we call the situation where the interest rate is zero.

Rahul Sunny answered 1 year ago

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