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Which formula correctly defines the relationship between a change in national income brought about from a change in government spending?
?Y = c?C
?Y = c?G
?G = c?Y
?Y = 1 / (1-c) ?G

The value of the muliplier in a two sector economy is 4. Out of every extra $ of income earned, $0.1 is saved and $0.1 spent on imports. What is the marginal tax rate of taxation?
0.05
0.1
0.2
0.25

The formula for the multiplier in a four sector economy is 1/w or 1/ (m+s+t). How might the value of the mulipier increase over time?
The government doubles its spending.
The government reduces its spending.
Households decide to save a higher proportion of each $ of income received.
Firms decide to retain a smaller proportion of net profits.

A country's national income is $500,000. Full employment output is $800,000. Out of every extra dollar of income received, 80% is consumed. What must the government spend to ensure that unemployment is zero?
Spend $50,000 more
Spend $60,000 more
Spend $60,000 less
Spend $50,000 less
Do nothing

A country's national income is $500,000. Full employment output is $800,000. Out of every extra dollar of income received, 80% is consumed. At what level should the government set interest-rates, given the following investment schedule? Investment scheduleIf interest-rates are 10%, investment = $40,000. If interest-rates are 8%, investment = $50,000. If interest-rates are 6%, investment = $60,000.
10%
8%
6%
0%

The following consumtpion function applies: C = 200 + .8Y where C = consumption and Y = national income. What are values of marginal propensity to consume (mpc) and the average propensity to consume (apc) at a level of national income of $2,000?
mpc of 0.6 and apc of 0.8
mpc of 0.8 and apc of 0.9
mpc of 0.9 and apc of 0.8

When there is autonomous consumption, apc is always higher than mpc.
TRUE
FALSE

In a four sector economy, the mps is 0.15, the mpm is 0.15 and the marginal tax rate is 0.2. National income is in equilibrium at $40,000 but full employment output is $70,000. Government spending is currently $5,000. If the government increases spending by just enough to close the deflationary gap, what will its spending be in total?
$30,000
$10,000
$5,000
$20,000

The economy is in short-term equilibrium where the short-run aggregage supply curve meets the aggregage demand curve at Y1, as shown below. What changes would bring the economy back to long-run equilibrium at Yfe(full employment)?I Fall in aggregate demand, engineered by deflationary fiscal policyII A rise in exportsIII A fall in interest ratesIV A rise in wagesV An increase in the marginal propensity to consume
I only
II only
I and III only
II and V only
I and IV only

The macro-eonomy is in long-run equilibrium at Y1 in the diagram below. The government has an objective of full -employment. Based on Keynesian assumptions, what combination of policies would you prescribe?
Expansionary fiscal policy plus deflationary monetary policy (with overall same impact on national income).
Expansionary demand-side policies only
Supply-side policies only
Leave it to the market

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Experienced teacher of micro- and macro-economics

Tests Created: 11

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