Assume the Savings Function Is Defined as S = -

question 29

Multiple Choice

Assume the savings function is defined as S = - 200 + (0.25) YD and the marginal income tax rate is t = 0.5.If autonomous investment increased by 50, then the full-employment budget surplus would

• A)not be affected
• B)increase by 10
• C)increase by 40
• D)increase by 80
• E)increase by 100

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Definitions:

Interest Rates

The cost of borrowing money or the return on invested capital, expressed as a percentage of the principal, affecting economic activity by influencing spending and saving behaviors.

Unemployment

The situation in which individuals who are capable of working and are seeking work are unable to find employment.

Marginal Propensity

The ratio of change in an economic variable (such as consumption) that occurs with a change in another variable (such as income).

Investment Accelerator

The concept that suggests investment spending in an economy may increase due to growth in overall economic activity, boosting further growth.