Suppose the Price Level Is Constant, Output Is Demand- Determined

question 95

Multiple Choice

Suppose the price level is constant, output is demand- determined, and the economy is closed with no government. If the saving function is S = - 100 + (0.2) Y, the simple multiplier is

• A)0.2.
• B)1.
• C)2.5.
• D)5.
• E)- insufficient information to know.

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Definitions:

Consumer Surplus

The discrepancy between what consumers are prepared and able to spend on a product or service and the actual amount they end up paying.

Producer Surplus

The difference between what producers are willing to sell a good for and the actual price they receive, serving as an indicator of producer welfare.

Direct Price Discrimination

A pricing strategy where a business charges different prices to different customers for the same product or service, based on willingness to pay.

Arbitrage

A means to defeat a price discrimination scheme; it occurs when low-value individuals are able to resell their lower-priced goods to the higher-value group.