b) Refer to the above data At the $100 level of income,the average propensity to
ID: 1121981 • Letter: B
Question
b) Refer to the above data At the $100 level of income,the average propensity to save w A .10 B. .20 C. 25 D. 90. 5. a) If the MPC is 70 and investment increases by $3 bition, the equilbrihum GDP wih: (15 Poirts) A. increase by $10 biltion. B. increase by $2.10 billion. C. decrease by $4.29 billion. D. increase by $429 billion. b) If the MPC is.6, the multiplier will be: B. 6.0 D. 1.67 c) Assume the MPC is 2/3. If investment spending increases by $2 billion, the level of GDP will increase by A. $3 billion. B. $2/3 billion. C. $6 billion. D. $2 billion. 6. Discuss the options used by fiscal policy to stabilize the economy.(10 Points) 7. Using examples, evaluate the five characteristics of a good medium of exchange. (15 PointsExplanation / Answer
5) A)MPC=0.7 then multiplier=1/1-mpc=1/1-0.7=3.333
Thus change in Y=multiplier*change in G=3.33*3=10
Thus ans is A
B) ans is C. Because Multiplier=1/1-mpc=1/1-0.6=1/0.4=2.5
C)mpc=2/3 multiplier=1/1-mpc=3
Thus change in Y=multiplier*change in I=3*2=6billion
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