Assume that in 2015, the following prevails in the Republic of Nurd: Government spending (G) = $0 Net taxes (T) = $0 Planned investment (I) = $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 = 0.20Y, where disposable income Y. = Y-T At the current level income (Y = $200). O A. leakages (S+ T) fall short of injections (I + G) and income will increase in the coming months. O B. 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. O D. leakages (S + T) exceed injections (I+ G) and income will fall in the coming months.
Assume that in 2015, the following prevails in the Republic of Nurd: Government spending (G) = $0 Net taxes (T) = $0 Planned investment (I) = $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 = 0.20Y, where disposable income Y. = Y-T At the current level income (Y = $200). O A. leakages (S+ T) fall short of injections (I + G) and income will increase in the coming months. O B. 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. O D. leakages (S + T) exceed injections (I+ G) and income will fall in the coming months.
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:Assume that in 2015, the following prevails in the Republic of Nurd:
Government spending (G) = $0
Net taxes (T) = $0
Planned investment (I) = $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 = 0.20Yg, where disposable income Y = Y-T
At the current level of income (Y = $200),
O A. leakages (S+ T) fall short of injections (I + G) and income will increase in the coming months.
O B. leakages (S + T) equal injections (I + G) and income will remain unchanged in the coming months.
O C. leakages (S + T) exceed injections (I + G) and income will increase in the coming months.
O D. leakages (S+ T) exceed injections (I + G) and income will fall in the coming months
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