If the Marginal Propensity to Consume (MPC)in Your Classmate's Nation

question 95

Multiple Choice

If the marginal propensity to consume (MPC) in your classmate's nation is 3/5 and the marginal propensity to save (MPS) in your country is 1/10,which of the following must be true?

• A)The spending multiplier is larger in your classmate's nation than in your country.
• B)The spending multiplier is smaller in your classmate's nation than in your country.
• C)Autonomous consumption is higher in your classmate's nation than in your country.
• D)Autonomous consumption is lower in your classmate's nation than in your country.
• E)Total consumption is lower in your classmate's nation than in your country.

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Definitions:

Short-run Phillips Curve

A graphical representation indicating an inverse relationship between the rate of inflation and the rate of unemployment in the short term.

Inflation

The measure of how quickly the general price level for products and services grows, resulting in reduced consumer purchasing ability.

Money Supply Growth Rate

The rate at which the amount of money available in an economy grows, influencing inflation and economic activity.

Natural Rate of Unemployment

The level of unemployment consistent with a stable rate of inflation, determined by the structure of the labor market.