Question

just answers

not explanations

Use the following diagram to answer Question 20 (all ngures are in s buen). EXP 100 20 A $30 injection of government infrastructure spending is likely to increase : A consumption by $30 and savings by $7.5 B comption by $30 and savings by S10 Consumption by S50 and savings 520 De mpion by 590 and savings by 530

Answer 1

20) from the diagram we can see that when income is increased from 200 to 280, consumption increases from 100 to 160. This indicates that the marginal propensity to consume is 60/80 or 0.75. therefore the spending multiplier will be 1/(1-0.75) = 4. When government spending is increased by 30 real GDP increases by 30*4 = 120 which means consumption is increased by 120*0.75 = 90 and saving is increased by 30. Select option D

5) option C is correct. Borrowers will be paying a lower real income so they are better off but savers are worse off because they receive a lower real income.

9) option B is correct.