Consider an Economic Model with No Income Taxes and No

question 37

Multiple Choice

Consider an economic model with no income taxes and no international trade.Suppose the marginal propensity to consume in Canada is 3/5, and the marginal propensity to save in India is 1/10.Which of the following characterizes how the Indian and Canadian economies would be affected?  

• A) Increases in government purchases would increase real GDP demanded more per dollar in India than in Canada. 
• B) Decreases in government purchases would increase real GDP demanded more per dollar in India than in Canada. 
• C) Increases in autonomous saving would increase real GDP demanded more per dollar in India than in Canada. 
• D) Real GDP demanded would be higher in India than in Canada.

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Definitions:

Dependent Variable

A variable in statistical modeling or experimental design that is expected to change as a result of manipulations to the independent variable.

Slope

In mathematics, the slope describes the steepness, incline, or grade of a line, defined as the ratio of the vertical change to the horizontal change between two points on the line.

Intercept

The point on a graph where a line or curve crosses an axis, often used to determine where a function or equation equals zero.

Least-Squares Regression

A statistical method to determine a line of best fit by minimizing the sum of squares of the distances of data points from the proposed line.