Use the Following to Answer Questions

question 57

Multiple Choice

Use the following to answer questions
Exhibit: Aggregate Expenditures (AE)
in a Simplified Economy

-(Exhibit: Aggregate Expenditures (AE)
In a Simplified Economy)
Consider a simple economy that is made up of only two sectors, households and firms, and that all investment is autonomous.Further, disposable personal income = real GDP and the economy is currently producing at its level of potential real GDP.What is the marginal propensity to consume in this economy?

• A)0.5
• B)0.6
• C)0.75
• D)0.8

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Definitions:

Interaxle Differential

Differential gearing used between the drive axles on a tandem drive, highway tractor; divides torque between the two drive axles. Also known as a power divider.

Drive Wheel

A wheel of a vehicle that receives power from the engine or motor to move the vehicle forward or backward.

Spinout

A situation where a vehicle loses traction, causing it to rotate uncontrollably.

Power Divider

A mechanical device in vehicles, particularly in heavy-duty trucks, that splits the driving force between the front and rear axles to improve traction.