Consider Two Economies,A and B

question 79

Multiple Choice

Consider two economies,A and B.Economy A has a marginal propensity to consume of 0.9,a net tax rate of 0.2 and a marginal propensity to import of 0.2.Economy B has a marginal propensity to consume of 0.7,a net tax rate of 0.2 and a marginal propensity to import of 0.2.Suppose there is an increase in autonomous investment of $5 billion in each of these economies.Which of the following statements is true?

• A)The AD curve shifts farther to the left in Economy B than Economy A.
• B)The AD curve shifts farther to the right in Economy A than Economy B.
• C)The AD curve shifts to the left the same amount in both economies.
• D)The AD curve shifts to the right the same amount in both economies.
• E)The simple multiplier is larger in Economy A.

---

Definitions:

Classical Conditioning

A learning process that occurs when two stimuli are repeatedly paired; a response that is at first elicited by the second stimulus is eventually elicited by the first stimulus alone.

Operant Conditioning

A method of learning that occurs through rewards and punishments for behavior, aiming at the strengthening or weakening of voluntary behaviors.

Social-Cognitive Learning

A theory that suggests learning occurs through observation, imitation, and modeling, influenced by both environmental and cognitive factors.

Mental Processes

Internal, covert activities of our minds, such as thinking, feeling, and remembering.