Consider the Simplest Macro Model with a Constant Price Level

question 106

Multiple Choice

Consider the simplest macro model with a constant price level and demand-determined output.The equations of the model are: C = 60 + 0.43Y,I = 150,G = 260,T = 0,X = 90,IM = 0.06Y.The marginal propensity to spend on national income,z,is

• A)0.06.
• B)0.37.
• C)0.43.
• D)0.49.
• E)0.63.

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Definitions:

Standard Price

A pre-determined cost assigned to a product or service, often used in budgeting and performance evaluations.

Direct Materials

Raw materials that are directly traceable to the production of specific goods or services.

Yards

A measurement unit equal to three feet or 0.9144 meters, often used in expressing lengths or distances.

Factory Overhead Cost Budget

A budget that estimates the cost for each item of factory overhead needed to support budgeted production.