Answer to Question #275973 in Macroeconomics for minma

Question

01) The investment multiplier is

02)If the MPC for the economy is 0.8, the:

a) MPS is 1/0.8

b) The multiplier is 5.

c) The multiplier is undefined.

d) The MPS is 0.4

e) The multiplier is 0.8

Other things constant, an increase in the households’ willingness to save more at every level of income will cause the consumption function to:

a) Become flatter because the MPC rises.

b) Make a downward parallel shift.

c) Remain stationary but the saving function to shift upward.

d) Become steeper because the MPC declines.

e) Shift to the left and upwards.

Suppose that in a simple economy there is no government taxing or spending and no foreign trade. A correct statement of the multiplier is:

a) k = 1/mpc

b) k = 1/(1+mpc)

c) k = 1/(1-mps)

d) k = 1/(1-mpc)

e) k = 1/(mpc+mps)

Answer 1

$Solution$

1)The concept of an investment multiplier states that every increase in public or private investment spending has a larger-than-proportional beneficial impact on aggregate income and the economy.

2)B

3)E

4)D