Consider a Simple Macro Model with a Constant Price Level

question 119

Multiple Choice

Consider a simple macro model with a constant price level and demand-determined output.If the marginal propensity to spend in such a model is 0.4,the simple multiplier is

• A)0.
• B)0.4.
• C)1.67.
• D)2.5.
• E)4.0.

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Definitions:

Prime Rate

The interest rate that commercial banks charge their most creditworthy customers, typically used as a benchmark for many other loans and credit products.

Bank Deposits

Funds that customers place into a bank account, which can range from savings and checking accounts to fixed deposits.

Financial Problems

Challenges faced by individuals or organizations in managing their money, often leading to a lack of financial stability or solvency.

Loss of Deposits

Occurs when funds deposited in a bank or financial institution are diminished due to factors like bank failures or fraud.