Consider a Simple Macro Model with a Constant Price Level

question 21

Multiple Choice

Consider a simple macro model with a constant price level and demand-determined output.The marginal propensity to spend out of national income,z,can be expressed as ________ (where t = net tax rate and m = marginal propensity to import) .

• A)z = MPC(1 - t - m)
• B)z = tY - mY
• C)z = MPC - (1 - t- m)Y
• D)z = MPC - (1 - t - m)
• E)z = MPC(1 - t)- m

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Definitions:

Net Capital Spending

Net capital spending is the total expenditure on fixed assets minus any sales of fixed assets, indicating a company's investment in its physical assets.

Comprehensive Income

Represents the total change in equity for a business entity not resulting from transactions with owners, including all revenues, gains, expenses, and losses.

Net Fixed Assets

The value of a company’s property, plant, and equipment minus any accumulated depreciation, indicating the tangible assets' net book value.

Liquid Asset

Assets that can be quickly and easily converted into cash without significant loss of value, including cash itself, marketable securities, and accounts receivable.