Consider two economies, A and B. Economy A hasa marginal propensity to consume of 0.9, a net taxrate of 0.3 and a marginal propensity to import of0.3. Economy B has a marginal propensity toconsume of 0.9, a net tax rate of 0.1 and amarginal propensity to import of 0.3. Supposethere is an increase in autonomous investment of$5 billion in each of these economies. Which ofthe following statements is true?Group of answer choicesThere is a larger decrease in real GDP in EconomyA as a result of the change in autonomousinvestment.There is a larger increase in real GDP in EconomyB as a result of the change in autonomousinvestment.There is a larger increase in real GDP in EconomyA as a result of the change in autonomousinvestment.There is an equal effect on real GDP in EconomiesA and B as a result of the increase in autonomousinvestment.There is a larger decrease in real GDP in EconomyB as a result of the change in autonomousinvestment.

In economics, the marginal propensity to consume (MPC) is defined as the proportion of an aggregate…

Consider two economies, A and B. Economy A has a marginal propensity to consume of 0.9, a net tax rate of 0.3 and a marginal propensity to import of 0.3. Economy B has a marginal propensity to consume of 0.9, a net tax rate of 0.1 and a marginal propensity to import of 0.3. Suppose

Consider two economies, A and B. Economy A has a marginal propensity to consume of 0.9, a net tax rate of 0.3 and a marginal propensity to import of 0.3. Economy B has a marginal propensity to consume of 0.9, a net tax rate of 0.1 and a marginal propensity to import of 0.3. Suppose

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assuming that there is no government spending or trade, an economy’s GDP is the sum of domestic consumption C and investment I, i.e. Y = C+ I Assume that I is unaffected by GDP Assume the consumption function is C = c0 + c1Y In any equilibrium aggregate demand, AD must be equal to Y, GDP. Given this model, which FIVE of the following statements are correct? Select one or more: A. If the economy above is a demand-driven economy, then the equilibrium solution for Y is given by Y = m(c0 + I), where m = 1/(1 - c1) is the multiplier. B. if c1 = 0.8 the multiplier is equal to 1/0.8= 1.25 C. if c1 = 0.75 the multiplier is equal to 4 D. assume c0 =100, I=50, c1=0.6. The equilibrium value of Y in a demand-driven economy is 300. E. Assume that Y is initially 400, I is initially 100, and the multiplier is 2.5. I increases by 10%. The multiplier implies that in equilibrium Y will increase by 25%. F. The higher is c1 the larger is the multiplier G. If consumers…
Consider two economies, A and B. Economy A has a marginal propensity to consume of 0.9, a net tax rate of 0.2 and a marginal propensity to import of 0.2. Economy B has a marginal propensity to consume of 0.7, a net tax rate of 0.2 and a marginal propensity to import of 0.2. Suppose there is an increase in autonomous investment of $5 billion in each of these economies. Which of the following statements is true? Select one: O A. The AD curve shifts farther to the right in Economy A than Economy B. O B. The AD curve shifts to the left the same amount in both economies. O C. The simple multiplier is larger in Economy A. O D. The AD curve shifts to the right the same amount in both economies. O E. The AD curve shifts farther to the left in Economy B than Economy A.
Are the gains achieved or losses incurred by delaying consumption?
The marginal propensity to consume is defined as: Question 64 options: the ratio of change in consumption on both domestic and foreign items to the change in income average consumption as a proportion of income the ratio of the change in consumption on domestic items to the change in income the change in consumption on domestic items multiplied by the change in income the change in consumption on domestic and foreign items multiplied by the change in income
Suppose a closed economy with no government spending or taxing is capable of producing an output of $1600 at full employment. Suppose also that autonomous consumption is $120, intended investment is $160, and the mpc is 0.50. What is the value of output (Y) in equilibrium?