Answer to Question #146661 in Macroeconomics for Prince Chauke

Question

Q.1.5 If the inflation rate is 6% and Susan receives a 6% increase in income, then, over the year, Susan’s:

(a) Real and nominal income both remain unchanged;

(b) Real and nominal income both rise;

(c) Real income rises but nominal income remains unchanged;

(d) Nominal income rises but real income remains unchanged.

Q.1.6 Given the import function, Z = 300 + 2/3Y, which of the following statements is correct?

(a) The marginal propensity to save is 1/3;

(b) The induced component is 300;

(c) 2/3 is the proportion of any income spent on imports;

(d) None of the statements is correct.

Q.1.7 An increase of R5 billion in income in a macroeconomy leads to an increase in R3 billion in consumption spending. From this information, we can determine that the marginal propensity to save in this economy is:

(a) 0.6;

(b) 0.5;

(c) 0.3;

(d) 0.4.

Answer 1

1.5) (d) Nominal income rises but real income remains unchanged.

1.6) (c) 2/3 is the proportion of any income spent on imports

1.7) (a) 0.6