In a Model with Neither Income Taxes nor International Trade,if

question 113

Multiple Choice

In a model with neither income taxes nor international trade,if the marginal propensity to consume in your classmate's nation is 3/5 and the marginal propensity to save in your country is 1/10,which of the following must be true?

• A)Increases in government purchases increase real GDP demanded more per dollar in your country than they do in your classmate's country.
• B)Decreases in government purchases increase real GDP demanded more per dollar in your country than they do in your classmate's country.
• C)Increases in autonomous saving increase real GDP demanded more per dollar in your country than they do in your classmate's country.
• D)Real GDP demanded is higher in your country than in your classmate's country.
• E)Total saving is higher in your classmate's country than in your country.

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Definitions:

Present Value Methods

A set of financial techniques used to calculate the current worth of a future stream of earnings or cash flows, taking into account the time value of money.

Time Value of Money

The concept that money available now is worth more than the same amount in the future due to its potential earning capacity.

Net Present Value Method

A financial analysis technique used to assess the profitability of an investment by calculating the difference between the present value of cash inflows and outflows.

Future Cash Inflows

Expected cash receipts or revenues generated from business activities in future periods.