44. If MPS is 0.2, then the multiplier is a. 8 b. 2 C. 4 d. 5 45. If the MPS is

Question

44. If MPS is 0.2, then the multiplier is a. 8 b. 2 C. 4 d. 5 45. If the MPS is 0.2 and a component of AD, such as Investment, is increased by $10, then the maximum amount of change in income and output for the nation would be . a. $2 b.$20 c. $50 d. $100 46.If the MPC is 0.8 and a component of AD, such as Investment is increased by $5, then the maximum amount of change in income and output for the nation would be a. $20 b. $25 c. $50 d. $100 47. Which of the following is NOT a function of money? A. Medium of Exchange. B. Hyper Inflation. C. Unit of Account. D. Store of Value. 48. Which of the following is NOT a liquid asset: A. Cash in the hand of the public. B. Checkable Account C. Traveler's Check. D. Money Market Mutual Fund. 49. What problem did trade by barter transactions pose? A. Double Coincidence of Wants B. Medium of Exchange. C. Unit of Account D. Store of Value. 50. What are the options of fiscal policy? A Taxes B. Government Spending. C. Combination of both. D. All of the Above.

Explanation / Answer

1). if mps is 0.2 then the multiplier is____

Sol. d) 5

Multiplier = 1/MPS = 1/0.2 = 5

2). If the MPS is 0.2 and a component of AD, such as Investment, is increased by $10, then the maximum amount of change in income and output for the nation would be ___________

Sol. c) 50

=10/0.2 = 50

3) If the MPC is 0.8 and a component of AD, such as Investment, is increased by $5, then the maximum amount of change in income and output for the nation would be ______

Sol. b) 25

Change in income = 5/(1-MPC) = 5/(1-0.8) = 5/0.2 = 25

4). Which of the following is not a function of money?

Sol. B) Hyper inflation

Money is often defined in terms of the three functions or services that it provides.Money serves as a medium of exchange, as a store of value, and as a unit of account.

5). Which of the following are not liquid assets?

Sol) Money market mutual fund

Actually all of the options are liquid asset but first three cash in hand, checkable deposit and traveller’s check are most liquid of them all are in category M1.

Money market mutual fund is a little less liquid falling in category M2.

6). What problem did trade by barter transactions pose

Sol. Double coincidence of wants

Time and effort searching for trading partners

7). What are the options of fiscal policy

Sol. All of the above

The federal government efforts to keep the economy stable by increasing or decreasing taxes or government spending.

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