Question

Consider two economies that are identical, with the exception that one has a high marginal propensity to consume (MPC) and one has a low MPC. If the money supply is increased by the same amount in each economy, the high MPC economy will experience:

Select one:
a. a smaller increase in output and a
smaller decrease in the interest rate.
b. A larger increase in output and a
smaller decrease in the interest rate.
c. a larger increase in output and a
larger decrease in the interest rate.
d. A smaller increase in output and a larger decrease in the interest rate

= A larger increase in output and a
smaller decrease in the interest rate.​

Answer 1

If the money supply is increased by the same amount in each economy, the high MPC economy will experience b. A larger increase in output and a smaller decrease in the interest rate.

What does a high MPC imply?

A high MPC implies increased consumption while a low MPC shows increased savings.

Two factors that increase MPC include:

• Readily available credit
• Lower interest rates.

Thus, if the money supply is increased by the same amount in each economy, the high MPC economy will experience b. A larger increase in output and a smaller decrease in the interest rate.

Learn more about the marginal propensity to consume (MPC) at https://brainly.com/question/14310761

#SPJ1