If the marginal propensity to consume (MPC) in your classmate's nation is 3/5 and the marginal...
If the marginal propensity to consume (MPC) in your classmate's nation is 3/5 and the marginal propensity to save (MPS) in your country is 1/10, which of the following must be true?
| a. |
Autonomous consumption is lower in your classmate's nation than in your country. |
|
| b. |
Autonomous consumption is higher in your classmate's nation than in your country. |
|
| c. |
The spending multiplier is smaller in your classmate's nation than in your country. |
|
| d. |
Total consumption is lower in your classmate's nation than in your country. |
|
| e. |
The spending multiplier is larger in your classmate's nation than in your country. |
Homework Answers
ANSWER:
The correct answer is option c that is The spending multiplier is smaller in your classmate's nation than in your country.
spending multiplier of classmate nation = 1 / mps = 1 / (1 - mpc) = 1 / ( 1 - 3 / 5) = 1 / (2 / 5) = 2.5
spendimg multiplier in my country = 1 / mps = 1 / (1/10) = 10
Add Answer to:
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