Question

(1) ​Automatic stabilizers lead to: Group of answer choices ​a decrease in taxes collected by the...

(1)

​Automatic stabilizers lead to:

Group of answer choices

​a decrease in taxes collected by the government during an economic expansion.

​an increase in unemployment compensation during a recession.

​Congressional action on changing the tax codes.

​none of the above

(2)

If disposable income rises from $15,000 to $20,000 and the marginal propensity to consume equals 0.8, then saving must increase by:

Group of answer choices

$400

$500

$1,000

$2,000

$4,000

(3)

Consider an island country called Chabotant. Suppose that in Year 1, disposable income in the country was $734 billion and consumption was $627 billion. Suppose further that in Year 2, disposable income is $815 billion. It has been observed that each time disposable income changes in this country by $100, consumption changes by $72. The level of saving in this country in Year 2 is:

Group of answer choices

$22.68 billion

$58.32 billion

$129.68 billion

$188 billion

$685.32 billion

(4)

When aggregate expenditures are less than aggregate production (measured by Real GDP), __________ is produced than households want to buy, which leads to __________ in inventory, which signals firms that they have __________, which causes firms to increase production.

Group of answer choices

less; decreases; underproduced

more; increases; underproduced

less; increases; underproduced

more; decreases; overproduced

more; increases; overproduced

(5)

Suppose in an economy, investment = $60, saving = $55, government spending+export = $100 and taxes+imports = $140. Then for this economy, total leakages exceed total injections by:

Group of answer choices

$15.

$25.

$35.

$40.

$45.

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Homework Answers

Answer #1

1) option 2)

Automatic stabilizers lead to rise in taxes during Expansion & Increase in Unemployment benefits during recession

.

2) option 3) 1000

MPC = .2, ∆S = .2*∆Y

= .2*5000

= 1000

.

3) option 3)

Each time , for ∆Y = 100, ∆S = 28

Saving in year 1, = 734-627

=107

∆ Y = 815-734

= 81

∆S = 81*.28= 22.68

Then in year 2, Saving = 107+22.68 = 129.68

.

4) option 5)

As AE< Y, so more is Produced, leading to rise in inventories, & firms overproduced

.

5) option 3) 35

Total leakages = S+M+T

= 55+140

= 195

Injections= I+G+X

= 60+100

= 160

So leakages exceed by 35

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