Consider Two Economies,A and B

question 126

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)There is a larger decrease in real GDP in Economy B as a result of the change in autonomous investment.
• B)There is a larger decrease in real GDP in Economy A as a result of the change in autonomous investment.
• C)There is a larger increase in real GDP in Economy B as a result of the change in autonomous investment.
• D)There is a larger increase in real GDP in Economy A as a result of the change in autonomous investment.
• E)There is an equal effect on real GDP in Economies A and B as a result of the increase in autonomous investment.

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Definitions:

National Labor Relations Act

A cornerstone piece of US legislation enacted in 1935 that protects the rights of employees and employers, encourages collective bargaining, and curtails certain private sector labor and management practices that can harm the general welfare.

Industrial Unionism

A labor union organizing method where all workers in the same industry, regardless of job or skill level, are organized into a single union.

Craft Unionism

represents a model of trade unions focusing on skilled workers in a specific craft or trade, aiming to protect their interests and maintain high standards.

CIO's Attitude

The general perspective or approach taken by the Congress of Industrial Organizations, a federation of unions that organize workers in industrial unions in the United States and Canada, towards labor issues and worker rights.