With a marginal propensity to save of .4, the marginal propensity to consume wil

Question

With a marginal propensity to save of .4, the marginal propensity to consume will be:
A. 1.0 minus .4.
B. .4 minus 1.0.
C. the reciprocal of the MPS.
D. .4.

7. If the MPC is .8 and disposable income is $200, then:
A. consumption and saving cannot be determined from the information given.
B. saving will be $20.
C. personal consumption expenditures will be $80.
D. saving will be $40.

8. Answer the question on the basis of the following consumption schedules. DI signifies disposable income and C represents consumption expenditures. All figures are in billions of dollars.

  

(Advanced analysis) Refer to the given data. When plotted on a graph, the vertical intercept of the consumption schedule in economy (3) is _____ and the slope is _____.
A. minus $2; .9
B. $2; .18
C. $100; .5
D. $2; .9

9. Capital goods, because their purchases can be postponed like ______ consumer goods, tend to contribute to ________ in investment spending.
A. nondurable; instability
B. nondurable; stability
C. durable; instability
D. durable; stability

10. The multiplier is useful in determining the:
A. full-employment unemployment rate.
B. level of business inventories.
C. change in the rate of inflation from a change in the interest rate.
D. change in GDP resulting from a change in spending.

11. At the $180 billion equilibrium level of income, saving is $38 billion in a private closed economy. Planned investment must be:
A. $138 billion.
B. $126 billion.
C. $38 billion.
D. $180 billion.

Explanation / Answer

6. A. 1.0 minus .4.

7. D. saving will be $40.

Explanation: MPC = 0.8

=> MPS = 1 - 0.8 = 0.2

=> Saving = 0.2 * 200 = $40

8. data is missing

9. C. durable; instability

10. D. change in GDP resulting from a change in spending.

11. $38 billion.

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