Practise calculating multipliers and propensities, balancing injections and withdrawals, identifying national-income gaps and applying the accelerator to investment changes.
In a two-sector economy, autonomous consumer expenditure increases by $ 100 billion, autonomous investment expenditure increases by $ 200 billion, and the marginal propensity to consume is 0.5.
What will the increase in National Income be?
$ 150 billion
$ 300 billion
$ 450 billion
$ 600 billion
D
According to the accelerator theory, what would cause investment in an economy to be lower than in the previous year?
a lower marginal propensity to consume than in the previous year
a lower marginal propensity to save than in the previous year
a smaller fall in national income than occurred in the previous year
a smaller rise in national income than occurred in the previous year
D
What leads to an inflationary gap?
Aggregate demand is greater than the maximum potential output of the economy.
Investment increases at a greater rate than profits received by a firm.
The economy is operating below its full capacity.
Innovation results in increased productivity in the economy.
A