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.If the marginal propensity to spend in such a model is 0.6,the simple multiplier is

• A)0.
• B)0.6.
• C)1.67.
• D)2.5.
• E)6.0.

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Definitions:

Interest

The cost of using someone else's money or the return on invested capital.

Land Improvements

Enhancements made to a plot of land to increase its value, such as landscaping, fencing, and installing irrigation systems.

Fixed Assets

Long-term tangible assets used in business operations, not expected to be converted into cash within a year, such as buildings and machinery.

Current Assets

Items of value that are likely to be cashed in, sold, or expended within the span of a year or throughout the usual functioning period of the company, whichever period lasts longer.