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The actual multiplier effect in the U.S. economy




1.The actual multiplier effect in the U.S. economy is less than the multiplier effect in the text examples because;a)the real-world MPS is larger than the MPS in the examples.;b)the MPC in the United States is greater than 1.;c)in addition to saving, households use some of any increase in income to buy imported goods and to pay additional taxes.;d)the gap between the nominal interest rate and the real interest rate widens as the economy expands or contracts.;2.If the marginal propensity to save is 0.2 in an economy, a $20 billion rise in investment spending will increase;a)GDP by $20 billion.;b) saving by $25 billion.;c) GDP by $120 billion.;d) consumption by $80 billion;3. Other things equal, serious recession in the economies of U.S. trading partners will;a)cause inflation in the U.S. economy.;b) depress real output and employment in the U.S. economy.;c) have no perceptible impact on the U.S. economy.;d) stimulate real output and employment in the U.S. economy.;4.Other things equal, if a change in the tastes of American consumers causes them to purchase more foreign goods at each level of U.S. GDP, then;a)inflation will occur domestically.;b) U.S. real GDP will rise.;c) U.S. GDP will fall.;d)unemployment will decrease domestically;5.Assume that in a private closed economy consumption is $240 billion and investment is $50 billion, both at the $280 billion level of domestic output. Thus;a)unplanned decreases in inventories of $10 billion will occur.;b)saving is $10 billion.;c)the MPC is.80.;d)unplanned increases in inventories of $10 billion will occur.;6.If the dollar appreciates relative to foreign currencies, we would expect;a)the multiplier to decrease.;b) a country's net exports to fall.;c) a country's exports and imports to both fall.;d) a country's net exports to rise.;7.;Which of the following best explains why prices tend to be inflexible even when demand changes?;a)Production costs do not tend to change when a firm varies its level of output.;b) Government regulations limit the number of times a firm can change prices in a year.;c) In most industries the profit-maximizing price does not change even when demand changes.;d) Firms may be reluctant to change prices for fear of setting off a price war or losing customers to rivals.;8.;If a $50 billion decrease in investment spending causes income to decline by $50 billion in the first round of the multiplier process and by $25 in the second round, the multiplier in the economy is;a)3.33.;b)10.;c)5.;d)2.


Paper#21241 | Written in 18-Jul-2015

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