Consider a Simple Macro Model with Government and Foreign Trade

question 41

Multiple Choice

Consider a simple macro model with government and foreign trade and where the price level is taken as given.The simple multiplier is equal to

• A)1/(1 - MPC).
• B)1/MPC.
• C)1/(1- MPS - t).
• D)1/(1 - (MPC(1 - t)- m )).
• E)1/(1- (MPS(1 - t)- m )).

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Definitions:

Income

Funds acquired regularly as a result of work or investment ventures.

Utility Function

Represents a consumer's preferences in a way that the utility or satisfaction they get from various goods or services can be measured and compared.

Budget Constraint

A limitation on the consumption choices of individuals or households, based on their income and the prices of goods and services.

Income

Income is the amount of money or goods received, typically within a certain period, in exchange for labor, goods sold, or investment.