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The multiplier in an open economy ________ the multiplier in a closed economy.
A) is larger than
B) equals
C) is smaller than
D) The multiplier can be smaller or larger, depending on the size of MPM and MPC.
If the consumption function is C = 90 + 0.75y, then the marginal propensity to save is
A) 0.25.
B) 0.75.
C) 67.5.
D) 90.
For crowding out to occur in the long run, an increase in government spending must
cause the money demand curve to shift ________ in order to ________ the interest rate.
A) upwards; increase
B) downwards; have no effect on
C) upwards; have no effect on
D) downwards; decrease
According to the accelerator theory of investment, a decrease in the expected future
growth rate of real GDP will cause:
A) current investment spending to decrease.
B) current investment spending to increase.
C) future investment spending to increase.
D) future investment spending to decrease.
Table 5.4
Refer to Table 5.4. Suppose this economy produces only the two goods X and Y. If year
2 is the base year, Real GDP in year 1 is:
A) $280.
B) $360.
C) $404.
D) $520.
According to the authors in this chapter, which of the following impedes
entrepreneurship from thriving in Sub-Saharan Africa?
A) institutions
B) diseases
C) government policy
D) inflation
Two goods are substitutes if:
A) the supply of one good decreases when the price of the other increases.
B) the supply of one good decreases when the price of the other decreases.
C) the demand for one good decreases when the price of the other increases.
D) the demand for one good decreases when the price of the other decreases.
The nominal interest rate is:
A) the interest rate quoted in financial markets.
B) unadjusted for the effects of inflation.
C) both of the above.
D) none of the above.
The theory of rational expectations suggests that the forecasts made using the rational
expectations model:
A) are always correct.
B) consistently overestimate the actual rate of inflation in the future.
C) are correct on average.
D) consistently underestimate the actual rate of inflation in the future.
The slope of the consumption function is equal to:
A) autonomous consumption.
B) the marginal propensity to consume.
C) the marginal propensity to save.
D) zero.
