Which of the Following Statements Must Be True in the Simple

question 98

Multiple Choice

Which of the following statements must be true in the simple macro model (with a closed economy and no government) ?

• A)APC increases as income rises.
• B)APS decreases as income rises.
• C)MPS and MPC are both negative.
• D)MPC is negative below a certain level of income.
• E)The sum of MPC and MPS is one.

Analyze the impact of price changes on a consumer's budget set and consumption possibilities.

Calculate the price of one good given the price of another good and a fixed budget.

Determine the maximum quantity of goods a consumer can afford under budget and dietary restrictions.

Analyze the effect of income changes on consumer choices and budget constraints.

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