a. The part of consumption that is determined by income is referred to as autono

ID: 1094536 • Letter: A

Question

a. The part of consumption that is determined by income is referred to as autonomous consumption.

True or False

b. If firms increase their investment spending, the resulting change in equilibrium GDP is equal to the change in investment spending

Divided by MPC,multiplied by 2.5 , alone , or multiplied by the expenditure multiplier (choose)

c.If the marginal propensity to consume is 2/3 and autonomous consumption spending increases by $3 trillion, what is the change in GDP

30 trillion , -3 trillion , 3 trillion ,9 trillion

a. The part of consumption that is determined by income is referred to as autonomous consumption.

False

Autonomous consumption (also exogenous consumption) is consumption expenditure that occurs when income levels are zero.

b. If firms increase their investment spending, the resulting change in equilibrium GDP is equal to the change in investment spending

multiplied by the expenditure multiplier

c.If the marginal propensity to consume is 2/3 and autonomous consumption spending increases by $3 trillion, what is the change in GDP

= 3 * 1/(1 - 2/3) = 3 * 1/(1/3) = $9 trillion

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