Question

QUESTION 24 Given the table below which of the following statements is TRUE? Consumption Savings MPC MPS APC APS Level of output 240 -4 260 0 280 4 300 8 320 12 16 340 360 20 380 24 400 28 A. Equilibrium is obtained when the level of output is 280 When the level of output is 320 APS is equal to 0,375 C. When the level of output is 360 APC is 0.94 D. When the level of output is 300 MPC is 0.75 B.

Answer 1

24. level Consumption Savings MPC output MPS APC APS 2uo 244 -4 1-02 -0.02 260 260 0 0.8 0.2 - 0 280 276 4 0.8 0.2 0.99 0.01 300 292 8 0.8 0.2 0.97 0.02 320 308 12 0.8 0.2 0.96 0.64 340 324 16 0.8 0.2 0-95 0.05 360 340 0-8 0.2 0.94 0.05 380 356 24 0.8 02 0.93 0.06 Чоо 372 28 0.8 0.2 0.93 0.07 Y- C+S DI C+S) Where Y Level of output C Consumption s Savings MPC OC/oY APC = CIDI MPS AS/AY APS = SIDI where DI > diaparabre inch

From the above table, we can observe that at output level equal to 360, APC is 0.94

Hence, the correct answer is option C.

25. An economy faces a recessionary gap if its actual output level is less than the potential output level (full-employment level). Whereas the inflationary gap is the situation in which the economy's actual output level is more than the potential output level (full-employment level).

At full employment level of 125 million workers, actual output is 1650 while potential output is 1700. Since actual output is less than the potential output level, this is a situation of recessionary gap. Hence, option A is true and option C is false.

At full employment level of 110 million workers, actual output is 1425 while potential output is 1400. Since actual output is more than the potential output level, this is a situation of inflationary gap. Hence, option B is true.

At full employment level of 105 million workers, actual output is 1350 while potential output is 1300. Since actual output is more than the potential output level, this is a situation of inflationary gap. Hence, option B is true.

Hence, the correct answer is option C.