Assume a simple model with no government or foreign sector. If an increase in autonomous investment of 100 leads to an increase in consumption of 300, the size of the expenditure multiplier is
A. 0.75
B. 1.33
C. 3
D. 4
E. 5
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Generally speaking, the effect on income resulting from a change in investment spending is greater if
A. the average propensity to consume is smaller
B. the marginal propensity to consume is smaller
C. the marginal propensity to save is smaller
D. the marginal propensity to save is larger
E. the average propensity to save is larger
The fluctuations in the income level that result from changes in investment spending
A. tend to be larger with a larger mpc
B. tend to be larger if the income tax rate (t) is larger
C. tend to be larger with a larger mps
D. tend to be smaller if the apc is smaller
E. depend only on the magnitude of the changes in investment spending but not on the size of the mpc
A decrease in the income tax rate would imply the following:
A. a decrease in saving
B. a decrease in government spending
C. a decrease in government transfer payments
D. an increase in the expenditure multiplier
E. all of the above
The expenditure multiplier is used to calculate the change in
A. spending caused by a change in income
B. equilibrium income caused by a change in autonomous spending
C. intended spending caused by a change in consumption
D. disposable income caused by a change in saving
E. government expenditures caused by a change in income
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