7. If consumption increases by $400 Billion and incomes increase by $500 Billion in a year,...

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7. If consumption increases by $400 Billion and incomes increase by $500 Billion in a year, what can we say about the margina

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Answer 1

Answer #1

7.Ans: The marginal propensity to consume ( MPC ) = 0.8

Explanation:

MPC = Change in consumption / Change in income

= 400 / 500 = 0.8

8. Ans: If the dollar were to strengthen against other world currencies then the net exports would be negative.

Explanation:

When a country's currency is strengthen against other world currencies then its export decreases and import increases. As a result the net export becomes negative.

Net exports = Exports - Imports

If Exports < imports , then net exports will be negative.

If Exports > Imports , then net exports will be positive.

9. Ans: With an MPC of .9 , the change in GDP would be $5000 if government spending increased by $500 million.

Explanation:

Multiplier = 1 / ( 1 - MPC) = 1 / ( 1 - 0.9 ) = 1/ 0.1 = 10

Change in GDP = $500 * 10 = $5000

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Answer 2

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Add Answer to: 7. If consumption increases by $400 Billion and incomes increase by $500 Billion in a year,...

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