Ch 8 HW example #67225

Which of the following did classical economists believe would happen if the product markets accrued surpluses? Prices would rise. Interest rates would rise. Wage rates would fall. The government would fix things.

The 45-degree line in the Keynesian model represents a set of points where _____ equals _____. disposable income; saving disposable income; consumption saving; consumption saving; investment

If disposable income is $3,000 and saving is $1,200, how much is the average propensity to consume? 0.4 0.6 1.2 2.5

In the Keynesian model, the principal determinant of saving is: interest rates. income. tax rates. investment.

_____ is the change in consumption associated with a change in income. The average propensity to consume The marginal propensity to consume The average propensity to save The marginal propensity to save

If the marginal propensity to consume is 0.9 and income increases from $10,000 to $11,000, by how much does consumption increase? $11,000 $1,000 $900 $100

The slope of the saving schedule is: the marginal propensity to consume. 1 minus the marginal propensity to consume. the average propensity to consume. the average propensity to save.

Firms decide how much to invest by comparing the rate of return on their projects with: their total profit. the productivity of the workers assigned to the projects. the interest rate. before-tax rate of return.

After the acceptance of Keynesian analysis, government: played a role in setting the interest rate only. actions toward macroeconomic policy grew significantly. reduced its role in the operation of the economy. turned to communism as the only solution to the Great Depression.

The 45-degree line in the Keynesian model represents: AE = C. AE = G. AE = I. AE = Y.

If AE = $7,600 and Y = $8,000, businesses will produce: more, raising both employment and income. less, lowering both employment and income. more, raising employment and lowering income. less, lowering employment and raising income.

If the marginal propensity to consume is 0.85, how much is the spending multiplier? 0.15 1.17 5.1 6.67

If $1,000 of additional spending occurs (from investment, say) and the marginal propensity to consume is 0.8, the total effect on the economy is an increase of _____ in income or output. $800 $1,000 $5,000 $8,000

If the multiplier is 2 and investment spending falls by $5 billion, then equilibrium income: increases by $10 billion. increases by $2.5 billion. decreases by $5 billion. decreases by $10 billion.

Which of the following illustrates the paradox of thrift? Consumer uncertainty causes people to save less; consumption rises; equilibrium income and production drop; savings drop because income is lower. Consumer uncertainty causes people to save more; consumption drops; equilibrium income and production drop; savings drop because income is lower. The government encourages saving by raising interest rates; higher interest rates reduce investment spending, which lower equilibrium income and production drop; savings drop because income is lower. As businesses save more, interest rates fall, thus reducing household savings.

If a government always balances its budget: the economy can never slide into a recession. raising taxes has no net effect on total spending. economic growth is spurred by showing businesses that budgets can be balanced. the effect of an increase in government spending on aggregate expenditures is weakened.

Suppose full employment real GDP is $13 trillion, current real GDP is $13.2 trillion, and the marginal propensity to consume is 0.5. The inflationary gap is: $0.2 trillion. $0.05 trillion. -$0.2 trillion. $0.1 trillion.