If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion in an economy, then consumption spending will increase by: O a. $20 billion. O b. $14 billion. O c. $6 billion. O d. $67 billion. O e. $28 billion.

If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion in an economy, then consumption spending will increase by: O a. $20 billion. O b. $14 billion. O c. $6 billion. O d. $67 billion. O e. $28 billion.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household…

A: * answer :- A)

Q: If nominal GDP increases from one year to the next, O prices real GDP or prices or both real GDP…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: Select one or more: O a. Households smooth their income to match their volatile consumption. O b.…

A: The overall idea is that the family spending relies upon the degree of pay produced during a given…

Q: b. In what direction and by how much will it eventually shift?

A: The demand curve will shift to the rightward by $60 billion.

Q: The transfer payment multiplier is smaller than the expenditure multiplier by the: O a. Transfer…

A: When talking about the multiplier impact of transfer payment and expenditure, it can be said that…

Q: O A. The consumption function shifts from A to B and the saving function shifts from C to D. O B.…

A: The consumption function is the relationship between disposable income and consumption. Whereas…

Q: Refer to the information provided in Figure 8.12 below to answer the questions that follow. AE AE AE…

A: The aggregate output (Y) in the economy is multiplier (m) times the autonomous part of aggregate…

Q: A country reports that unplanned inventories increased during 2019. The increase in unplanned…

A: In an economy, inventory refers to the amount of output produced in a specific year and stocked at a…

Q: O savings increase O savings decrease O GDP increases O investments decrease Question 10 Marginal…

A: The multiplier impact alludes to the hypothesis that administration burning through expected to…

Q: I: Investment; G: Government spending; EX: Exports; T: Taxes; and IM: Imports. Suppose that I+G+EX…

A: At equilibrium, Y = C + I + G + EX - IM I + G + EX = 25 IM= 15 Y= C + 25 - 15 Y= C + 10

Q: An increase in interest rates shifts the Investment Demand curve up and increases Business…

A: Aggregate expenditure(AE) is the summation of all the expenditure undertaken by all the economic…

Q: Which of the following equations is incorrect? O A. MPC + MPS = AYD B. OC. AYDXMPS = AS O D. AC + AS…

A: MPC is marginal propensity to consume. MPS is the marginal propensity to save. YD is the…

Q: Aggregate planned expenditure decreases if O a. investment increases. O b. real GDP decreases. O c.…

A: Aggregate planned expenditure is computed as:

Q: Suppose consumption is given by: C=100+0.5(Y-T), planned investment is 200, government spending is…

A: Aggregate demand refers to the total demand for commodities and services made by all the economic…

Q: The value of the Multiplier decreases in only one of the following cases: O An increase in the…

A: Multiplier states the change in the variable due to change in autonomous Variable.In terms of…

Q: A reduction in the tax rates may not stimulate the economy if: A. The tax cut is temporary and does…

A: Disosable income refers to the amount of income people have remaining after payment of taxes. A…

Q: 34 64. If the marginal propensity to save (MPS) is small, O a. make the simple multiplier larger. O…

A: Multiplier =1/1-MPC or 1/MPS

Q: QUESTION 31 If the consumption function in the economy is: 500+0.5*Y (Y refers to national income)…

A: Aggregate demand refers to the total demand for commodities and services made by all the economic…

Q: QUESTION 10 If the multiplier is 5 what would be the change in consumption if income rises by 50? O…

A: MPC is the marginal propensity to consume. Multiplier is calculated by the following formula :-…

Q: government spending is increased by $200, taxes are reduced y $300, and the MPS is.4, equilibrium…

A: Output in equilibrium: It is the amount of output in an economy when the aggregate demand equals the…

Q: Over the business cycle, O A. only real GDP fluctuates around its trend and potential GDP remains…

A: The business cycle model shows how a country's real GDP changes over some time, going through stages…

Q: Question 4 Assume the economy's consumption and saving schedules simuitaneously shift downward. This…

A: Consumption refers to the use of commodities and services by the consumers. Savings is the amount of…

Q: In the income-expenditure model, if autonomous investment decreases by $10 billion, a. planned…

A: The income expenditure model shows the relationship between income and expenditure in an economy. It…

Q: o inventories change when aggregate planned expenditure is less than Peal GDP? regate planned…

A: Inventories are the unplanned investment. Firms plans to investment, but if actual investment is…

Q: Say, the expenditure multiplier for an economy is 2. An increase in government spending by $300…

A: here we calculate how much economy boost due to government expenditure , so the calculation of the…

Q: Which curve is drawn at 45 degree to show income and consumption re

A: A line or curve making an angle of 45 degree and shooting from the origin is drawn as a line of…

Q: If an increase in investment spending of $50 million results in a $400 million increase in…

A: The multiplier effect in economics refers to the proportional amount of increase in final income…

Q: Question 28 Use the graph given below to answer this question. Assume that the MPC is 0.8. How much…

A: The marginal propensity to consume (MPC) is defined as the percentage of an increase in pay that a…

Q: t A Moving to another question will save this response. Quèstion 25 In an open mixed economy, the…

A: Answer:

Q: QUESTION 10 Assuming that the "equilibrium income" is $4,000 and the "full-employment" income is…

A: Government expenditure or expenditure includes all government consumption, investment and transfer…

Q: In a macro model where the marginal propensity to consume out of disposable income is 0.80, the net…

A: Multiplier states that when in an economy any factor is increasing or changing which can affect the…

Q: An increase in the value of the simple multiplier can be caused by... O a. An increase in the net…

A: A simple multiplier broadly estimates the change in the economic output due to the change in the…

Q: 2. Consider an economy that is characterised by the following set of equations: C = co+c¡Yp Yp = Y…

A: PLEASE FIND THE ANSWER BELOW.

Q: The transfer payments multiplier is the effect of a change in transfer payments on O A. aggregate…

A: A transfer payment is a one-sided payment in which no goods or services are paid for; like a…

Q: Suppose a given hypothetical economy has the following values GDP-520 BIlion, Consumption =$13…

A: Here, the value of consumption, government purchases, GDP and budget surplus is given for a…

Q: Use the table below to answer the following question. Income (Dollars) 20,000 24,000 0.75 What is…

A: Marginal Propensity to Consume measures the proportion of an rised income that gets spent on the…

Q: An increase in the marginal propensity to consume (MPC) O a. increases the multiplier, so that…

A: Marginal propensity to consume (MPC) measures the change in consumption due to a change in income.…

Q: these multiple choice Questions from MACROECONOMICS Course. I need the final answer,please.

A: 62) Consumption function (C=a+bYd) C=1100 + 0.6Yd

Q: Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household…

A: Answer: It is given that for a 1% increase in household wealth the consumer spending will increase…

Q: When C + lg = GDP in a private closed economy, S = lg and there are no unplanned changes in…

A: Answer A.True

Q: Which of the following statements about the income-expenditure must be true? Other things equal; the…

A: Sum of Marginal Propensity to Save and Marginal Propensity to consume is equal to 1. The relation…

Q: The aggregate expenditure curve shows the relationship between aggregate planned expenditure and…

A: The aggregate expenditure curve is derived from the Keynesian macroeconomic model and shows the…

Q: Which of the following changes in personal income tax would lead to the smallest increase…

A: The act of using products and services to fulfill human desires and needs is referred to as…

Q: Assume that MPS is 0.4. If spending increases by $8 billion, then real GDP will increase by

A: The aggregate expenditure is the total spending that is done by all the economic agents in the…

Q: The slope of the aggregate expenditure line is always this slope equals the than 1. If there are no…

A: Aggregate expenditure is the sum total of consumption, planned investment, government purchases, and…

Question

If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion in an economy, then consumption spending will increase by:
a. $20 billion.
O b. $14 billion.
c. $6 billion.
d. $67 billion.
e. $28 billion.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Suppose that Amazon decides to spend $10 million on a new distribution center. If the marginal propensity to consume is .8. then how much will GDP go up by once the multiplier process has played out? O $10 million O $20 million O $40 milion O $50 million
11
Suppose that Country X's government wants to increase output. If the multiplier equals 2.5 and the government increases spending by 300, how much will output increase by? O 750 O 200 50 100
Which of the following is not an argument by those who oppose tax-law changes to encourage saving? O A. Saving is not very responsive to changes in the tax rate. O B. Saving is not an important determinant of a nation's ability to produce output. OC. Reducing the budget deficit instead of changing the tax laws could raise saving. O D. Changes in the tax laws to induce saving would distribute the tax burden less fairly.
B2
Question 7 If the MPC in the economy is 0.75, govemment could shift the aggregate demand curve rightward by $30 billion by cutting taxes by $10 billion. O A. true. O B. false.
A high interest rate will lead to: O a. low investment spending. O b. no investment spending. no changes in investment spending. O d. high investment spending. C.
Suppose the economy is such that the current GDP is great than potential GDP. If the government does not act, which of the following would we expect to occur? Select one or more: O a. Price levels will decrease Ob. GDP will increase O c. Price levels will increase O d. No effect of GDP e. GDP will decrease O f. No effect on price levels
All of the following are true when there is an unplanned decrease in inventories, except: O a. Actual investment is greater than planned investment O b. Real GDP will be rising O c. GDP is less than aggregate expenditures O d. Saving is less than planned investment
In the aggregate expenditure (AE) model, the economy is driven to its equilibrium by changes in a. government expenditures on goods and services that are the result of changes in real GDP. O b. autonomous expenditures that are the result of changes in real GDP. investment that are the result of changes in real GDP. O C. O d. induced expenditures that are the result of changes in real GDP.
Suppose the marginal propensity to consume in an economy is 0.60. If the disposable income in this economy changes by $50 billion, consumption changes by $ billion 50 40 20 30 O O O O
8