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Chapter 6 Answers

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4 views4 pages

Chapter 6 Answers

Uploaded by

Mariam Lahzy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Chapter 6 : The multiplier theory.

Answer the following questions:


1) The value of the spending multiplier decreases when?
a) Tax rates are decreased
b) Exports decrease
c) Government expenditures decrease
d) The MPS increases
Answer: d
2) Marginal Propensity to Consume refers to:
a) Rate of change of consumption as at income changes.
b) Saving per unit of income.
c) Consumption per unit of income.
d) Change in saving per unit of income.
Answer: a

3) As income rises from $50,000 to $60,000, consumption increases from


$40,000 to $48,000. In this case, what is the MPC?
a) 0.80
b) 0.20
c) 0.10
d) 0.90
Answer: a

4) Marginal Propensity to Consume, lies between…….


a) 0 to infinity.
b) 0 to 1.
c) 1 to infinity.
d) 0 to 10.
Answer: b
5)Which of the following is described as change in savings per unit change
in income?
a) Marginal Propensity to Consume (MPC)
b) Marginal Propensity to save (MPS)
c) Average Propensity to Consume (APC)
d) Average Propensity to save (APS)
Answer: b

6) The total sum of MPC and MPS equal.


a) 2
b) Between 0 to 1
c) 1
d) Infinity
Answer: c

7) If the marginal propensity to save is 0.6, then the marginal propensity to


consume is
a) 0.6.
b) 0.4.
c) 1.0.
d) not determinable.
Answer: b

8) the relationship between disposable income and consumer spending is


a) Negative relation.
b) Indirect relation.
c) Positive relation.
d) Non of the above.
Answer: c
9) Disposable income equals difference between
a) Saving and taxes
b) Consumption and saving
c) Income and taxes
d) Consumption and taxes
Answer: c

10) Given an MPC of 0.75, the value of the simple output multiplier is
a) 0
b) 1
c) 2
d) 4
Answer: d

12)If your disposable personal income increases from 30,000 to 40,000


and your savings increases from 2,000 to 4,000, your marginal propensity
to save (MPS) is:
a) 0.2.
b) 0.4.
c) 0.5.
d) 0.8.
Answer: a

13) When the nation determined increase taxes $200 million, and the MPS
equal 25%. The effect of change in taxes on the economy equals.
a) 600
b) 200
c) – 600
d) – 3
Answer: c
14) Determine the effect on GDP of an increase in G (20 $ million) with
MPC= 0.80
a) 5
b) 20
c) 100
d) 0.20
Answer: c

15) If the MPS equals 0.20, the MPC equals…… and the multiplier
equals…..
a) 0.40, 5
b) 0.20, 4
c) 0.80, 5
d) 0.80, 4
Answer: c

16) If the change in GDP equals 20, and change in AD equals 5, the
multiplier equals….
a) 4
b) 5
c) 6
d) 0
Answer: a
17) If the multiplier equals 4 MPC equals ……. And MPS equals….
a) 1, 05
b) 0.5 , 0.5
c) 0.75 , 0.25
d) 0.25 , 0.75
Answer: c

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