In a Simple Economy in Which Prices Are Constant and with No

question 114

Multiple Choice

In a simple economy in which prices are constant and with no income taxes or imports, the marginal propensity to save is 0.2. If exports increase $50, what impact will that have on aggregate expenditure?

• A) decrease by $100
• B) increase by $100
• C) decrease by $250
• D) increase by $250

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Definitions:

Monopolistically Competitive

Refers to a market structure where many companies sell similar but not identical products, allowing them to have some control over their prices.

Economic Profits

Profits that exceed the opportunity costs of a firm, calculated as total revenues minus both explicit and implicit costs.

Long Run

A period during which all factors of production and costs are variable, and firms can enter or exit the industry.

Total Revenue

The gross revenue from selling products or services before deducting any costs.