The multiplier will be smaller, other things being equal:
The multiplier will be smaller, other things being equal:
A. the smaller the fraction of each dollar earned that goes to taxes.
B. the larger the fraction of each dollar of disposable income that is spent on imports.
C. the smaller the fraction of each dollar of disposable income that goes to saving.
D. All of these answers are true.
Homework Answers
The answer will be (b) the larger the fraction of each dollar of disposable income that is spent on imports.
We all know that The larger is the marginal propensity to consume, the larger is the fraction of increased income in each “round” of the multiplier process that will go to additional consumption purchases. Because each round of the multiplier process will therefore be larger the greater the marginal propensity to consume, the multiplier will also be larger. Here fraction of each dollar of disposable income increases which is spent on import.
Other things equal, if U.S. disposable income falls, imports will _____ and the current account deficit...
Other things equal, if U.S. disposable income falls, imports will _____ and the current account deficit will _____. Question 3 options: a) fall; increase b) rise; decrease c) fall; decrease d) rise; increase The real exchange rate is defined as the nominal rate times the inflation rate. Question 4 options: a) True b) False
The actual money multiplier is: a) usually smaller than the potential money multiplier. b) always equal...
The actual money multiplier is: a) usually smaller than the potential money multiplier. b) always equal to the potential money multiplier. c) usually larger than the potential money multiplier. d) usually equal to the potential money multiplier.
22. Why is the multiplier for a change in taxes smaller than for a change in spendi...
22. Why is the multiplier for a change in taxes smaller than for a change in spending? a. A change in taxes has no effect on aggregate demand, only on aggregate supply. b. A change in taxes directly affects government spending as well, lowering the multiplier. c. A change in taxes affects spending directly, but at a slower rate than spending does. d. A change in taxes affects disposable income and then consumption rather than spending directly....
Assume that the British government imposes quotas on imports by British companies. Other things being equal,...
Assume that the British government imposes quotas on imports by British companies. Other things being equal, the U.S. demand for pounds would ____, the supply of pounds for sale would ____, and the equilibrium value of the pound would ____. a. decrease; increase; decrease b. remain unchanged; decrease; increase c. remain unchanged; increase; decrease d. increase; increase; increase
According to the Bureau of Economic Analysis, during the recession of 2007 - 2009, household saving as a fraction of di...
According to the Bureau of Economic Analysis, during the recession of 2007 - 2009, household saving as a fraction of disposable personal income increased from a low of just over 1 percent in the first quarter of 2008 to 5 percent in the second quarter of 2009 All else equal, a higher saving rate would A. decrease MPC, increase MPS, and decrease the multiplier so that changes in planned investment will have a smaller impact on equilibrium output B. increase...
3) The law of demand includes the statement other things being equal." These other things include...
3) The law of demand includes the statement other things being equal." These other things include all of the following EXCEPT A) the price of related goods. B) incomes. tastes D) the price of the good itself. 3) John believes that when the price of a good increases people will purchase more of the good. This statement is A) consistent with the law of supply. B) consistent with the law of demand. referring to money prices. D) inconsistent with the...
All other things being equal, the price and yield on a bond are a. positively related...
All other things being equal, the price and yield on a bond are a. positively related b. negatively related c. sometimes positively and sometimes negatively related d. not related e. indefinitely related
Why is the multiplier for a change in taxes smaller than for a change in spending?...
Why is the multiplier for a change in taxes smaller than for a change in spending? a. A change in taxes has no effect on aggregate demand, only on aggregate supply. b. A change in taxes directly affects government spending as well, lowering the multiplier. c. A change in taxes affects spending directly, but at a slower rate than spending does. d. A change in taxes affects disposable income and then consumption rather than spending directly. e. All of the...
Other things being equal, what happens to the current price of a bond if the bond...
Other things being equal, what happens to the current price of a bond if the bond has a larger par value? Decrease. Increase. No change. Cannot be determined without knowing the market interest rate.
All other things being equal, an increase in the interest rate that the company must pay...
All other things being equal, an increase in the interest rate that the company must pay on its long term debt will have an impact on which of the following ratios? a) Return on equity (ROE). V Net Income Alorage SE. b) Return on total assets (ROA) NI + Interest Expense xl- Tax Rate Net profit margin percentage- Average d) a) and b). Total Assets / Net Incomev a) and c). Net Sales
According to the Bureau of Economic Analysis, during the recession of 2007 - 2009, household saving as a fraction of disposable personal income increased from a low of just over 1 percent in the first quarter of 2008 to 5 percent in the second quarter of 2009 All else equal, a higher saving rate would A. decrease MPC, increase MPS, and decrease the multiplier so that changes in planned investment will have a smaller impact on equilibrium output B. increase...
3) The law of demand includes the statement other things being equal." These other things include all of the following EXCEPT A) the price of related goods. B) incomes. tastes D) the price of the good itself. 3) John believes that when the price of a good increases people will purchase more of the good. This statement is A) consistent with the law of supply. B) consistent with the law of demand. referring to money prices. D) inconsistent with the...
Why is the multiplier for a change in taxes smaller than for a change in spending? a. A change in taxes has no effect on aggregate demand, only on aggregate supply. b. A change in taxes directly affects government spending as well, lowering the multiplier. c. A change in taxes affects spending directly, but at a slower rate than spending does. d. A change in taxes affects disposable income and then consumption rather than spending directly. e. All of the...
All other things being equal, an increase in the interest rate that the company must pay on its long term debt will have an impact on which of the following ratios? a) Return on equity (ROE). V Net Income Alorage SE. b) Return on total assets (ROA) NI + Interest Expense xl- Tax Rate Net profit margin percentage- Average d) a) and b). Total Assets / Net Incomev a) and c). Net Sales
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