Question

51.

As the marginal propensity to expend rises, the multiplier:

decreases.

is impossible to determine.

increases.

remains constant.

54.

Suppose the economy is initially in equilibrium, but then exports fall relative to imports. Based on the Multiplier Model, and assuming no other changes occur:

equilibrium will still exist.

a shortage will develop.

a surplus will develop.

withdrawals from the spending stream will be less than injections.

55.

According to Classical economists of the 1930's, an excess supply of labor will end when:

government creates enough jobs for people to earn enough income to buy the surplus of product.

government supports labor unions that keeping wages high enough for workers to afford to buy goods and services.

wages fall enough to eliminate unemployment.

taxes are cut enough to stimulate private spending.

56.

According to the Multiplier Model, if firms cannot supply the level of output demanded at existing prices, they will:

cut prices until the excess supply is eliminated.

raise prices until the excess demand is eliminated.

cut production until the excess supply is eliminated.

raise production until the excess demand is eliminated.

Answer 1

a) "C"

An increase in the marginal propensity to consume will increase the multiplier in the market.

b) "D"

Higher imports and a falling exports will increase the leakage in the economy and reduce the injection in the market.

c) "C"

Wages will fall enough and at that reduced wage if someone is not ready to work he will not be considered as unemployed.

d) "B"

They will raise the price to the point were the excess demand is eliminated.