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People decide to save 20 percent of their incomes. The value of the marginal propensity to...

People decide to save 20 percent of their incomes. The value of the marginal propensity to consume is ________ and the value of the spending multiplier is ________.

0.8; 80 percent

0.2; 1.25

0.8; 5

0.2; 4

0.8; 2 percent

2.

Country Z is suffering from the effects of a negative supply shock. If the government’s main goal is to return output to potential, then it will ________. If the government’s main goal is to maintain low and stable inflation, then it will ________.

pursue contractionary fiscal policy; pursue expansionary fiscal policy

pursue expansionary fiscal policy; take no action

pursue contractionary fiscal policy; take no action

pursue expansionary fiscal policy; pursue expansionary fiscal policy

take no action; take no action

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