Assume a model with an income tax rate of t = 0.25 and a marginal propensity to consume of c = 0.8. What could cause the level of equilibrium income to decrease by 1,000?
A. a decrease in autonomous net exports of 400
B. a decrease in autonomous saving of 200
C. a decrease in government purchases of 250
D. a decrease in government transfer payments of 500
E. an increase in autonomous investment of 500
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The size of the expenditure multiplier depends on
A. the marginal propensity to consume
B. the marginal propensity to import
C. the marginal income tax rate
D. all of the above
E. only A) and B)
In a simple model with no government or foreign sector, a decline in investment of $10 billion will lead to a $50 billion decline in the equilibrium level of income if
A. the mps is 0.2
B. the mpc is 0.5
C. the ratio of total consumption to total income is 0.8
D. changes in consumption divided by changes in income equal 0.2
E. changes in saving divided by changes in income equal 0.8
Assume a model with no government or foreign sector. If national income is Y = 800, autonomous consumption is Co = 100, and the marginal propensity to consume is c = 0.7, then total consumption is
A. 100
B. 560
C. 660
D. 700
E. 800
Assume a simple model of the expenditure sector with no income taxes. If a lump sum tax decrease of 200 leads to an increase in income of 800, what is the size of the mps?
A. 0.1
B. 0.2
C. 0.25
D. 0.4
E. 0.8