Consider a Simple Macro Model with Demand- Determined Output

question 9

Multiple Choice

Consider a simple macro model with demand- determined output. Which of the following parameters will produce the strongest automatic stabilizer?

• A)MPC = 0.7, t = 0.1, m = 0.4
• B)MPC = 0.9, t = 0.2, m = 0.4
• C)MPC = 0.7, t = 0.3, m = 0.2
• D)MPC = 0.8, t = 0.1, m = 0.2
• E)MPC = 0.8, t = 0.2, m = 0.3

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Definitions:

Equal Amounts

This term typically refers to financial transactions or mathematical problems where a series of payments or values are the same in each period.

Annuity Due

An annuity due is a type of annuity payment where payments are made at the beginning of each period, rather than at the end, as in an ordinary annuity.

Perpetuity

An infinite series of equal payments at equal intervals of time.

Present Value

The present-day value of a sum of money to be received in the future or a series of future cash flows, based on a certain return rate.