What is the multiplier? If MPC =0.75, what is the value of the multiplier in the simple model of the economy?
What will be an ideal response?
The multiplier is the change in equilibrium GDP divided by a change in autonomous expenditure. In the simple model of the economy, the multiplier = 1/(1-MPC) which equals 1/(1-0.75 ) = 4
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Consumer surplus is
A) the total difference between the total amount that consumers actually pay for an item and the total amount that they would have been willing to pay. B) the total difference between the total costs firms incur in producing an item and the utility consumers derive from purchasing the item. C) the total difference between the total amount that consumers would have been willing to pay for an item and the total amount that they actually pay. D) the total difference between the utility consumers derive from purchasing an item and the total costs firms incur in producing the item.
When the tax structure of a nation is progressive, as incomes increase, the tax rate:
A. declines. B. remains the same. C. increases. D. is proportional.