Question

If, according to the permanent income hypothesis, CP = 0.9Y+ and Y2x = YLt-1 +0.5(X+-YP t.1), then the MPC out of current income will be A. B. 0.45 0.95 0.5 0.9. C. D According to the permanent income hypothesis, during recessionary periods we should observe. I A. B. C. D. a rise in the APC. a fall in the APC. a rise in the MPC.. a fall in the MPC. According to the simple version of the accelerator theory of investment, the level of investment will depend on the t A. B. C. D. rate of change in interest rate. level of government spending. rate of change in output. level of existing inventories.

Answer 1

Q1) option A)

MPC out of current income = .9*.5= .45

.

Q2) option A)

Recessionary period is short run period

APC = C/Y = cYp/Y

Y : transitory income , Yp= permanent income

So during recession, Y falls

So APC rises, as Yp is unchanged

.

Q3) option D)

Level of existing inventories