Question

O O QUESTION 1 1 point A decrease in price of a certain good most likely will lead to a. no change in demand and no change in quantity demanded. b. an increase in quantity demanded but no change in the demand for that good. c. an increase in quantity demanded and an increase in the demand for that good. d. an increase in demand but no change in quantity demanded. QUESTION 2 1 poim Assume an economy with an upward-sloping aggregate supply curve and an MPC of 0.80. An increase in investment spending of $50 billion will most likely increase the macroeconomic equilibrium GDP by a. $200 billion. b. more than $50 billion but less than $250 billion. C. O$40 billion. O d. more than S200 billion, 1 poi QUESTION 3 If we observe that every increase in income of $120 million generates an increase in consumption of $80 million, then the simple multiplier is O a. 2 ОБ.32. OC 3 O d.2/3. O e. 8

Answer 1

1. When there is a change in the price of a good the quantity demanded changes. As the price for a good falls, there is

b) an increase in quantity demanded but no change in the demand for the good.

2. MPC=0.80

Multiplier=1/(1-1.80) = 5

An increase in investment spending by 50, will change the GDP by $50*5 = $250

d) more than $200 billion.

3. MPC = 80/120 = 2/3

Multiplier = 1/(1-MPC) = 1/(1-2/3) =1/(1/3) = 3

c) 3