Author Question: Assume an economy experiences, for a given period, a 1 increase in output and a 5 increase in ... (Read 89 times)

michelleunicorn

  • Hero Member
  • *****
  • Posts: 565
Assume an economy experiences, for a given period, a 1 increase in output and a 5 increase in productivity. Given this information, we know that which of the following occurred for this economy during this period?
 
  A) The unemployment rate increased during this period.
  B) The unemployment rate decreased during this period.
  C) The unemployment rate did not change during this period.
  D) The effects on the unemployment rate are ambiguous.
  E) none of the above

Question 2

Discuss and explain what effect a reduction in the marginal propensity to consume has on the size of the multiplier.
 
  What will be an ideal response?



Anton

  • Sr. Member
  • ****
  • Posts: 302
Answer to Question 1

A

Answer to Question 2

A reduction in the marginal propensity to consume will cause a reduction in the multiplier. When firms increase production in response to some initial change in demand, households will increase their consumption by a smaller amount when the mpc falls. So, the income-induced change in demand will be that much smaller causing a smaller multiplier effect.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

Bacteria have been found alive in a lake buried one half mile under ice in Antarctica.

Did you know?

Multiple experimental evidences have confirmed that at the molecular level, cancer is caused by lesions in cellular DNA.

Did you know?

To maintain good kidney function, you should drink at least 3 quarts of water daily. Water dilutes urine and helps prevent concentrations of salts and minerals that can lead to kidney stone formation. Chronic dehydration is a major contributor to the development of kidney stones.

Did you know?

The first oncogene was discovered in 1970 and was termed SRC (pronounced "SARK").

Did you know?

Never take aspirin without food because it is likely to irritate your stomach. Never give aspirin to children under age 12. Overdoses of aspirin have the potential to cause deafness.

For a complete list of videos, visit our video library