Answer:
4.The marginal propensity to consume is the change in consumption expenditure divided by the change in disposable income. _______
FALSE Is related to the change in income not disposable income.
5.If the MPC is 0.8, the marginal propensity to save will be 0.4. _______
FALSE As person can either consume or saved this two should add to 1
6.In a Keynesian macroeconomic model, private savings will equal the sum of private investment, the government budget deficit, and the international current account surplus.
TRUE The current account surplus
Savings = Investment + Budget deficit + net exports
The net exports cover the budget deficit
7. When the economy is in Keynesian macroeconomic equilibrium, planned investment is equal to actual investment. _______
TRUE There is no unplanned investment for unsold goods
8.The larger the MPS, the smaller the Keynesian government spending multiplier. _______
FALSE
The formula for the multiplier is:
1 / (1 - marginal propensity to consume) =
1 / Marginal propensity to save
Asthe MPS increases it gets closer to 1 thus, decreasing the multiplier
9.If the MPC is 0.75, the Keynesian government spending multiplier will be 4/3; that is, an increase of $ 300 billion in government spending will lead to an increase in GDP of $ 400 billion. _______
FALSE 1/(1-0.75) = 1/0.25 = 4
300 X 4 = 1,200 BILLONS
10. If the MPC is 0.75, the lump-sum tax multiplier will be -4, that is, an increase in taxes of $ 100billion will lead to a drop in GDP of $ 400 billion
FALSE
The tax multiplier is -MPC / (1 - MPC)
-0.75 / (1 - 0.75) = -0.75 / 0.25 = -3
Then 100 x -3 = -300 billon decrease
Explanation:
