Question

1. Which of the following is NOT a leakage from the Circular Flow of Income Model:...

1.

Which of the following is NOT a leakage from the Circular Flow of Income Model:

Group of answer choices

Taxes

Government Spending

Imports

Saving

2.

When GDP > Aggregate Expenditures, it has a ___________ effect.

Group of answer choices

Neutral

Lagging

Expansionary

Contractionary

3.

Suppose that a certain country has an MPC of 0.9 and a real GDP of $500 billion.

If its investment spending decreases by $3 billion, what will be its new level of real GDP?

Group of answer choices

$503 billion

$547 billion

$530 billion

$470 billion

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Homework Answers

Answer #2

Ques: Option B is correct. Government spending is not a leakage from the circular flow of income model. It is an injection.

Ques: When GDP > AE, it means Aggregate Supply is higher than Aggregate Demand than it has a contractionary effect. Option D is correct.

Ques: MPC = 0.9

Multiplier = 1/ 1- MPC

= 1/1-0.9 = 1/0.1

= 10

∆I = -$3 Billion

∆Y = Multiplier * ∆I

= 10 * (-$3billion)

= -$30 billion

Hence Equilibrium GDP will decrease by 30billion

NEW GDP will be $470 billion

Option D is correct.

answered by: anonymous
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