Consider an initial IS-LM equilibrium with normally-sloped curves. An increase in government spending takes us to a new equilibrium with ________ income and ________ interest rate. Select one: a. an unchanged, a higher b. higher, a lower c. higher, a higher d. lower, an unchanged

If the MPS rises, then the MPC will: a. Fall b. Rise c. Stay the same In what direction will each of the following occurrences shift the consumption and saving schedules, other things equal? a. A large decrease in real estate values, including private homes. b. A sharp, sustained increase in stock prices. c. A 5-year increase in the minimum age for collecting Social Security benefits. d. An economywide expectation that a recession is over and that a robust expansion will occur. e. A substantial increase in household borrowing to finance auto purchases. Irving owns a chain of movie theaters.  He is considering whether he should build a new theather downtown.  The expected rate of return is 15 percent per year.  He can borrow money at a 12 percent interest rate to finance the project.  Should Irving proceed with this project? Which of the following scenarios will shift the investment demand curve right? (Select one or more answers) a. Business taxes increase b. The expected return…

Suppose that investment demand increases by $400 billion and no leakages occur except household saving. Assume further that households have a marginal propensity to consume of 75 percent. Instructions: Round your responses to one decimal place. a. Compute four rounds of multiplier effects. Changes in This Cycle's Spending (in billions) $400.0 First cycle Second cycle Cumulative Change in Spending (in billions) $400.0 Third cycle Fourth cycle b. What will be the final cumulative impact on spending? billion

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Which of the following would not increase consumption spending? O Decreased disposable income. Increased household wealth O A lower interest rate O Expectations of greater future income

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Is 3. Consumption function and non-income determinants The following graphs show an economy's initial position at point B along its consumption function C. Suppose disposable income suddenly and unexpectedly decreases. On the graph, shift either the C curve or the initial point on the C curve to show the impact of a fall in disposable income. Real Consumption Spending (Bilions of dollars) 0 Disposable Income (Billions of dollars) C 16 с 0 B Now suppose that there is an increase in the interest rate households are paid on money they save. On the following graph, shift either the C curve or the initial point on the C curve to show the impact of an increase in the interest

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You are given data on the following variables in an economy: Government spending                           300 Planned investment                               200 Net exports                                           50 Autonomous taxes                                250 Income tax rate                                    0.1 Marginal propensity to consume            0.5   Use the data above to answer the following questions. Consumption (C) is 600 when income (Y) is equal to 1500. Solve for autonomousconsumption.                                                                                                                                         Solve for the equilibrium level of output in the following two scenarios: there isan income tax t=0.1, there is no income tax in the economy. Denote these two variablesby and  respectively.                                                  In the economy with an income tax of 10%, what is the budget balance of thegovernment? Solve…

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