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Author Question: In an economy with no income taxes or imports, the marginal propensity to consume is 0.80. The ... (Read 131 times)

s.tung

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on: Jun 29, 2018
In an economy with no income taxes or imports, the marginal propensity to consume is 0.80. The expenditure multiplier is
 
  A) 1.25. B) 10.0. C) 0.80. D) 5.00. E) 0.20.

Question 2

If the Fed makes the quantity of money grow at the same rate as the growth rate of real GDP and velocity does not change, in the long run what happens to the price level and the inflation rate?
 
  What will be an ideal response?


cegalasso

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Reply #1 on: Jun 29, 2018
Answer to Question 1

D

Answer to Question 2

If the quantity of money is growing at the same rate as real GDP and velocity does not change, then the price level does not change. In this case, the inflation rate equals 0 percent.


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s.tung

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Reply #2 on: Jun 29, 2018
Thank you


cegalasso

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Reply #3 on: Jun 29, 2018
No problemo


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