# Economics

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1. If net taxes are cut, consumer
spending increases by an amount less then the full amount of the tax cut
2. if the MPC is 0.75 what is the value of the tax multiplier?
-3.0
3. If the MPC is 0.6 and if the government purchases and net taxes both increase by \$20 billion, by how much will equilibrium output change?
it will increase by \$20 billion
4. Suppose the MPC is 0.85. If the government purchases increace by \$10 billion and net taxes fall by \$10 billion, equilibrium output will
increase by \$123.3 billion
5. one way to describe the tax multiplier is that it equals the
spending multiplier -1.0
6. for any change in net taxes, we can calculate the resulting change in equilibrium GDP by using the following formula
change in GDP=[-MPC/(1-MPC] x change in taxes
7. If the tax multiplier is -4.0 what is the marginal propensity to consume?
.80
8. if the marginal propensity to consumer is .75 and autonomous consumption spending will decrease by \$30 billion, by how much would next taxes need to decrease in order to have no change in output? (ignore any timing issues)
\$40 billion
9. Everything else being equal, a higher interest rate
reduces consumption spending as people have a greater incentive to save
10. which of the following would be most likely to increase consumption spending?
a reduction in consumer credit card debt
11. the most important factor that influences total spending is
real disposable income
12. the marginal propensity to consume is greater than zero but less then one
true
13. which of the following statements is most accurate?
most of the variation on consumption spending can be explained by changes in disposable income
14. which of the following would lead to a decrease in autonomous consumtion spending?
an increase in the interest rate
15. if the marginal propensity to consume is 0.5 and disposable income increaes by \$10,000, by how much will consumption spending increase?
\$5000
16. if he marginal propensity to consume is .75, net taxes are fixed at \$2000 and real income rises by \$12000, by how much will real consumption spending increase?
\$9000
17. if real disposable income increased by \$10000 and real consumption spending increased by \$7500 what is the marginal propensity consumer (MPC)?
.75
18. if real consumption spending increases by \$400 billion each time real disposable incomes rises by \$1000 billion, the marginal propsensity to consume is
.4
 Author: jenboettcher1 ID: 18739 Card Set: Economics Updated: 2010-05-11 06:38:04 Tags: economics midterm Folders: Description: economics Show Answers: