If the marginal propensity to consume is 0.75, net taxes are fixed at $2,000, and real income rises by $12,000, by how much will real consumption spending increase? a. $12,000 b. $7,500 c. $9,000 d. $7,000 e. $8,000

If the marginal propensity to consume is 0.75, net taxes are fixed at $2,000, and real income rises by $12,000, by how much will real consumption spending increase? a. $12,000 b. $7,500 c. $9,000 d. $7,000 e. $8,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

If the marginal propensity to consume is 0.75, net taxes are fixed at $2,000, and real income rises by $12,000, by how much will real consumption spending increase?

	a.	$12,000
	b.	$7,500
	c.	$9,000
	d.	$7,000
	e.	$8,000

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MCQ The table below provides income and consumption data in billions of dollars: Disposable Income Consumption Savings 100 80 --- 200 150 --- Calculate the marginal propensity to consume for the economy. A) 0.8 B) 0.2 C) 0.3 D) 0.7
1) Following is information for the economy of Donut. All units are million dollars. Their autonomous consumption is $500, and the marginal propensity to consume is 0.6. Investment spending is constant at $300, and government expenditure is constant at $200. Exports are constant at $100 and imports are constant at $230. Net taxes are constant at $100. Calculate and state your answers for the following questions. A.. What is the value of private saving in this economy when the real GDP is $500? B..What is the value of autonomous aggregate expenditure i.e. AE0? C..What is the size of the multiplier in this economy? D... What is the value of aggregate planned expenditure when real GDP is $1000?
Aggregate Expenditures and Multipliers Assignment a. Using the aggregate expenditure function above, what is the current level of real GDP? b. Using the aggregate expenditure function above, what would be the level of real GDP if the aggregate expenditure function shifted up by $0.2T? c. If Investment expenditures increase by $300B and MPC is equal to 0.90, what will be the increase in real GDP? d. If Government expenditures increase by $800B and MPS is equal to 0.05, what will be the increase in real GDP?
The value of the multiplier is necessarily increased if a. the marginal propensity to consume increases and the marginal propensity to import falls. b. the marginal propensity to consume falls and the tax rate falls. c. the marginal propensity to consume and the marginal propensity to import rise. d. the income tax rate falls and the marginal propensity to import rise.
60. Assume a recessionary gap of $300 B exists in the U.S. macroeconomy. Also assume that the MPC .80. How much do taxes need to change and do the change in taxes represent an increase or a decrease? (Use simple multiplier formula) A. $100 B, increase B. $300 B, increase C. $75 B, decrease D. $62 B, increase
The fact that marginal propensity to consume (MPC) is larger than 0 means that a. Consumption will decrease following a decrease in current income b. Consumption will increase following a decrease current income c. Consumption will increase following a decrease in future income s. Consumption will decrease following as increase in current income
Explanation
if the government cuts taxes in period 1 and cuts government spending in period 2 - this will increase the disposable income of the consumers - won't this increase consumption for consumers having an ambiguous effect on private saving. this is because if consumption is a normal good - increasing the income - positive income effect. My question is for some reason if consumer' disposable income increases - doesnn't this mean consumption must increase - whether it increases more/ enough to neutralise the tax cut effect is debatable and situation dependent - but surely there is an ambiguous effect on private saving for this reason
Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.75. That is, if disposable income increases by $1, consumption increases by 75¢. Suppose further that last year disposable income in the economy was $500 billion and consumption was $450 billion. From the preceding data, you know that the level of saving in the economy last year was $________ billion and the marginal propensity to save in this economy is ____________. Suppose that this year, disposable income is projected to be $700 billion. Based on your analysis, you would expect consumption to be $_____ billion and saving to be $________ billion.
2. Determine the multiplier and the net effect of the following autonomous changes in spending: a. An influx of $100 billion in government spending when the marginal propensity to consume is 0.75. b. An influx of $250 billion in business investment when the marginal propensity to consume is 0.5. C. An influx of $180 billion in export sales revenue when the marginal propensity to consume is 0.8.
What will be the impact on the spending multiplier if the marginal propensity to save (MPS) increases? A.The spending multiplier will increase. B.The spending multiplier will remain unaffected. C.The spending multiplier will decrease. D.The impact on the spending multiplier cannot be determined.
QUESTION 3 Give a hypothetical numerical example to show the relationship between the marginal propensity to consume (MPC) and the multiplier (m)? a. b. Considering both the simple Keynesian and the aggregate demand-supply frameworks, if households as a group experience a decrease in wealth at a given price level, what happen to Total Expenditure (TE), Aggreggate Demand (AD) and Real GDP. Illustrate and explain the change using a suitable graph.