Macroeconomics Answers

 In a given economy, consumption increases by $2.5 trillion following a $4 trillion increase in disposable income. What is the marginal propensity to save in that economy?

0.375

2.67

1.5

0.625

Based on our understanding of the Aggregate Expenditure (AE) Model (AE), we know that an increase in c₁ (where C = c₀ + c₁Yd) will cause the AE function to become:

Flatter and a given change in autonomous consumption (c₀) to have a smaller effect on output.

Flatter and a given change in autonomous consumption (c₀) to have a larger effect on output.

Steeper and a given change in autonomous consumption (c₀) to have a larger effect on output.

Steeper and a given change in autonomous consumption (c₀) to have a smaller effect on output.

In the aggregate expenditure model for a closed economy, assuming investment, government spending and taxes are exogenous, if the marginal propensity to consume is 0.8, a simultaneous 50 unit increase in government spending and a 20 unit decrease in investment will change equilibrium income by:

350 units.

87.5 units.

150 units.

500 units.

If 75% of any increase in income is spent on consumption, then an increase in autonomous investment of R1 billion results in an increase in national income of as much as

R5 billion

R1.33 billion

R4 billion

R6 billion

Using insights from Solow (1956) model prove that economic productivity ΔlnA is the key determinant of economic growth (Δln y) if output per effective worker is given as  

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