Author Question: If the dollar appreciates: a. imports to the United States become more expensive for foreigners b. ... (Read 62 times)

berenicecastro · **on:** Jun 30, 2018

If the dollar appreciates:
a. imports to the United States become more expensive for foreigners
b. exports from the United States become more expensive for foreigners
c. imports become more expensive for U.S. citizens.
d. exports from the United States become cheaper
e. the dollar will exchange for fewer units of a foreign currency

Question 2

Explain why the marginal propensity to save and the marginal propensity to consume sum to 1.

aloop · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

b

Answer to Question 2

When we write MPC + MPS = 1, we are stating that a change in disposable income will induce a combination of consumption and savings changes that will equal 100 percent of that initial change in disposable income. This is because the Keynesian model assumes that people do two things with their disposable income, spend it or save it. What is not spent is saved.