Author Question: Which of the following will not cause consumption, and as a result, aggregate demand, to increase? ... (Read 49 times)

littleanan · **on:** Jun 30, 2018

Which of the following will not cause consumption, and as a result, aggregate demand, to increase?
a. an optimistic business forecast of future income growth
b. a tax cut
c. an increase in consumer confidence
d. a tax increase

Question 2

Imagine an economy that does not have international trade and is initially in equilibrium. Later the government increases the level of spending by 350 million because it received a gift from abroad. In this economy, only 65 cents of every dollar is spent, and the rest is saved. What is the marginal propensity to save for this economy?
a. 0.5
b. 0.25
c. 0.65
d. 0.35
e. Cannot be determined