The larger the marginal propensity to consume:
a. the larger will be consumers' savings.
b. the more pronounced will be the impact of an expansionary fiscal policy.
c. the smaller will be consumer's consumption.
d. the smaller will be the spending multiplier.
b
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Autonomous aggregate expenditures increases by $100 million, the marginal propensity to consume is 0.60, marginal propensity to invest is 0.20, and the marginal propensity to import is 0.10. Calculate the change in income
What will be an ideal response?
Starting from short-run equilibrium, the following occurs: individuals expect higher (future) incomes and wage rates rise. What is the effect on the price level and Real GDP in the short run?
A) The price level rises and Real GDP rises. B) The price level falls and Real GDP falls. C) The price level rises, but the effect on Real GDP cannot be determined. D) Real GDP rises, but the effect on the price level cannot be determined. E) Real GDP falls, but the effect on the price level cannot be determined.