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)
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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
If autonomous investment increases by 100 and government purchases decrease by 100, which of the following is true?
A. income will increase by 100
B. income will increase by 200
C. income will increase by the multiplier times 100
D. income will decrease by the multiplier times 100
E. income will not change