Table 13-2 -Refer to Table 13-2. Consider a Simple Economy That Is

question 129

Multiple Choice

Table 13-2

-Refer to Table 13-2. Consider a simple economy that is made up of only two sectors, households and firms, and that all investment is autonomous. Further, disposable personal income = real GDP and the economy is currently producing at its level of potential real GDP. What is the marginal propensity to consume in this economy?

• A) 0.5
• B) 0.6
• C) 0.75
• D) 0.8

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Definitions:

Semiannual Interest

An interest payment made twice per year on investment vehicles such as bonds, which represents a portion of the annual interest rate.

Annual Yield

The return on an investment over a one-year period, expressed as a percentage of the investment’s initial cost.

Market Rate

The current price or interest rate at which goods, services, or financial instruments are traded in a competitive marketplace.

Present Value Tables

Tables that show the present value of cash to be received in the future, discounted at various interest rates.