Suppose the marginal propensity to consume is 0.63, the marginal ...

[Engineer]

Suppose the marginal propensity to consume is 0.63, the marginal propensity to import equals 0.08, and personal income taxes amount to 9 percent of GDP. The spending multiplier for this economy is equal to _____.
 a. 0.54
  b. 0.80
  c. 1.25
  d. 1.41
  e. 1.85

Question 2

Which of the following explains why the quantity of a good demanded decreases when its price increases?
 a. Consumer preferences change when the price of a good changes.
 b. The nominal income of consumers falls when the price of a good increases.
  c. Substitutes become relatively cheaper when the price of a good increases.
  d. Complements become relatively cheaper when the price of a good increases.

[paavo]

Answer to Question 1

e

Answer to Question 2

c

[Engineer]

Excellent

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