Consider a Simple Macro Model with Demand-Determined Output and the Following

question 8

Multiple Choice

Consider a simple macro model with demand-determined output and the following specific parameter values:
A. Marginal propensity to consume out of disposable income = 0.6
B. Marginal propensity to consume out of national income = 0.48
C. Marginal propensity to import = 0.23
The simple multiplier without government and foreign trade in this economy is and the simple multiplier with government and foreign trade in this economy is .

• A) 1.67; 1.33
• B) 1.67; 4
• C) 2.5; 1.33
• D) 2.5; 2.5
• E) 2.5; 4