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Author Question: If the marginal propensity to save is equal to 0.5 in the simple Keynesian model, then a 10-unit ... (Read 35 times)

cherise1989

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on: Jun 30, 2018
If the marginal propensity to save is equal to 0.5 in the simple Keynesian model, then a 10-unit increase in government spending will cause output to rise by
 
  a. 5 units.
  b. 10 units.
  c. 20 units.
  d. 25 units.
  e. 40 units.

Question 2

Briefly explain why gross domestic product is not a welfare measure.
 
  What will be an ideal response?


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SomethingSomething

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Reply #1 on: Jun 30, 2018
Answer to Question 1

C

Answer to Question 2

Gross domestic product measures production of goods and services. It is neither a measure of welfare nor a measure of material well-being. GDP does not give any weight to leisure and it also fails to subtract some welfare costs of production.


cherise1989

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Reply 2 on: Jun 30, 2018
Thanks for the timely response, appreciate it

ryhom

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Reply 3 on: Yesterday
Excellent

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