Consider a Model in Which Output Is Demand-Determined

question 114

Multiple Choice

Consider a model in which output is demand-determined.If the marginal propensity to spend out of national income is 0.4,then a $0.6 billion decrease in government purchases will cause equilibrium national income to ________ by approximately ________.

• A)decrease; $1.50 billion
• B)decrease; $1.00 billion
• C)decrease; $0.24 billion
• D)increase; $1.00 billion
• E)increase; $1.50 billion

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Definitions:

Debt Investments

Financial assets involving the loan of money by an investor to a borrower, typically with the expectation of receiving interest income in addition to principle repayment.

Equity Method

An accounting technique used to record investments in other companies, where the investment is accounted for based on the investor’s share of the investee's equity.

Stock Investments

Financial assets consisting of stakes in companies through the purchase of common or preferred stock shares, with the expectation of earning dividends or capital gains.

Net Income

The amount of money that remains after all operating expenses, taxes, and dividends have been paid, representing the company's profit.