The multiplier helps explain why a decrease in taxes causes real Gross Domestic
ID: 1205361 • Letter: T
Question
The multiplier helps explain
why a decrease in taxes causes real Gross Domestic Product (GDP) to fall by more than the amount of the decrease in taxes.
why a fall in investment cause real Gross Domestic Product (GDP) to rise by more than the amount of the decrease in investment.
why a rise in government expenditures causes real Gross Domestic Product (GDP) to rise by more than the amount of the increase in government spending.
why an increase in disposable income causes real Gross Domestic Product (GDP) to rise by less than the amount of the increase in disposable income.
If the marginal propensity to save (MPS) increases, the multiplier
decreases.
can either increase or decrease, depending on what happens to the marginal propensity to consume (MPC).
stays the same.
increases.
QUESTION 60
The investment function will shift when there is a change in
the opportunity cost of retained earnings.
firms' profit expectations.
the cost of borrowing.
the interest rate.
1.43 points
QUESTION 61
In the Keynesian model, whenever planned saving exceeds planned investment,
there will be unplanned inventory accumulation.
real GDP will not be influenced.
the interest rate will remain unchanged.
there will be unplanned inventory depletion.
1.43 points
QUESTION 62
In the Keynesian model, whenever planned saving is less than planned investment,
there will be unplanned inventory depletion.
the interest rate will remain unchanged.
there will be unplanned inventory accumulation.
real GDP will not be influenced.
1.43 points
QUESTION 63
Government purchases
are determined by the political process.
are determined by the public.
are influenced by interest rates.
are determined by suppliers.
1.43 points
QUESTION 64
If, at some level of output, total planned real expenditures are less than real Gross Domestic Product (GDP),
real GDP will either fall or remain unchanged, depending on the MPC.
real GDP will rise.
real GDP remains unchanged.
unplanned inventories will increase and real GDP will fall.
1.43 points
QUESTION 65
When the economy is operating at the equilibrium level of GDP, we know that
total planned real expenditures equal real GDP.
real net exports equal inventory changes.
planned real investment spending equals real net exports of zero.
total planned real consumption expenditures equal real GDP.
1.43 points
QUESTION 66
One divided by the marginal propensity to save (MPS) is the formula for
the inverse of the multiplier.
the multiplier.
one minus the multiplier.
autonomous consumption.
Thinking as an economist would, which is true of investment?
Investment represents spending on capital goods.
Investment is a stock concept.
Investment is putting money into stocks and bonds.
It is the portion of disposable income that is not used for consumption or saving.
Other things being equal, if input prices rise in a country, then there would be
cost-push inflation.
demand-pull inflation.
cost-push deflation.
more production and a lower price level.
In the short run, if the price level rises, then the overall economy can temporarily produce beyond its nominal capacity. One reason for this is that
existing capital equipment can be used more intensively.
wage rates rise almost simultaneously with the price level.
the unemployment rate usually rises dramatically along with the price level.
workers can be switched from counted to uncounted production.
why a decrease in taxes causes real Gross Domestic Product (GDP) to fall by more than the amount of the decrease in taxes.
why a fall in investment cause real Gross Domestic Product (GDP) to rise by more than the amount of the decrease in investment.
why a rise in government expenditures causes real Gross Domestic Product (GDP) to rise by more than the amount of the increase in government spending.
why an increase in disposable income causes real Gross Domestic Product (GDP) to rise by less than the amount of the increase in disposable income.
If the marginal propensity to save (MPS) increases, the multiplier
decreases.
can either increase or decrease, depending on what happens to the marginal propensity to consume (MPC).
stays the same.
increases.
QUESTION 60
The investment function will shift when there is a change in
the opportunity cost of retained earnings.
firms' profit expectations.
the cost of borrowing.
the interest rate.
1.43 points
QUESTION 61
In the Keynesian model, whenever planned saving exceeds planned investment,
there will be unplanned inventory accumulation.
real GDP will not be influenced.
the interest rate will remain unchanged.
there will be unplanned inventory depletion.
1.43 points
QUESTION 62
In the Keynesian model, whenever planned saving is less than planned investment,
there will be unplanned inventory depletion.
the interest rate will remain unchanged.
there will be unplanned inventory accumulation.
real GDP will not be influenced.
1.43 points
QUESTION 63
Government purchases
are determined by the political process.
are determined by the public.
are influenced by interest rates.
are determined by suppliers.
1.43 points
QUESTION 64
If, at some level of output, total planned real expenditures are less than real Gross Domestic Product (GDP),
real GDP will either fall or remain unchanged, depending on the MPC.
real GDP will rise.
real GDP remains unchanged.
unplanned inventories will increase and real GDP will fall.
1.43 points
QUESTION 65
When the economy is operating at the equilibrium level of GDP, we know that
total planned real expenditures equal real GDP.
real net exports equal inventory changes.
planned real investment spending equals real net exports of zero.
total planned real consumption expenditures equal real GDP.
1.43 points
QUESTION 66
One divided by the marginal propensity to save (MPS) is the formula for
the inverse of the multiplier.
the multiplier.
one minus the multiplier.
autonomous consumption.
Thinking as an economist would, which is true of investment?
Investment represents spending on capital goods.
Investment is a stock concept.
Investment is putting money into stocks and bonds.
It is the portion of disposable income that is not used for consumption or saving.
Other things being equal, if input prices rise in a country, then there would be
cost-push inflation.
demand-pull inflation.
cost-push deflation.
more production and a lower price level.
In the short run, if the price level rises, then the overall economy can temporarily produce beyond its nominal capacity. One reason for this is that
existing capital equipment can be used more intensively.
wage rates rise almost simultaneously with the price level.
the unemployment rate usually rises dramatically along with the price level.
workers can be switched from counted to uncounted production.
Explanation / Answer
Answers.
1. The multiplier helps explain why a rise in government expenditures causes real Gross Domestic Product(GDP) to rise by more than the amount of the increase in the government spending.
2. Multiplier = 1/(1-c) {where c is MPC and we know that MPC + MPS =1 , So, multiplier = 1/MPS} If the MPS increases then the value of multiplier decreases.
3. The investment funciton will shift when there is a change in firm's profit expectations.
4. Whenever planned savings exceeds planned investment, there unpplanned inventory depletion
5. Whever planned savings is less than planned investment, there will be unplanned inventory accumultaion.
6. Government purchases are determined by suppliers.
7. If total planned real expenditures are less than real GDP, then unpplanned inventories will increase and real gdp falls.
8. When the economy is operting at the equilibrium level of GDP, we know that total planned expenditures = real GDP.
9. 1/MPS = Multiplier
10.As an economist, Investment is the portion of income that is not used for consumption and savings.
11. If input price rises, there will be cost push inflation. (Adverse supply shock)
12. Workers can be switched from counted to uncounted production.