If the Economy Is Initially Suffering from a Recessionary Gap

question 32

Multiple Choice

If the economy is initially suffering from a recessionary gap equal to 100 units and the marginal propensity to consume is 0.75,then the income-expenditure multiplier is equal to _______,so if net exports rise by _______ units,the economy will return to potential output.

• A) 0.75;133
• B) 4;250
• C) 4;25
• D) 5;200
• E) 5;20

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Definitions:

Cigarettes

Narrow cylinders of finely cut tobacco rolled in paper for smoking, often containing a filter at one end.

Tax

A mandatory monetary fee or different kind of tax levied on individuals by a state entity with the purpose of raising funds for government operations and public projects.

Aggregate Demand Function

An economic formula that represents the total demand for goods and services in an economy at various price levels.

Swimming Pools

Man-made structures designed to hold water for swimming, diving, or recreational bathing.