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In a simple economy (assume there are no taxes; thus, Y is disposable income), the consumption function is: C=200+0.80Y

The current level of real GDP is $5000.

2. At this level of real GDP, consumption will be$_____and savings will be$_____.

If GDP were to increase by $1000, consumption would increase by $______(Round your responses to the nearest dollar.)

At a real GDP level of $5000, the average propensity to consume is____and the average propensity to save is_____. (Round your answers to two decimal places.)

4. Freds Fish House is contemplating an investment of $2,000,000 in new shrimp boat and deep fryers. Management of this company predicts a 4.4 percent annual return on this investment. The current market rate of interest is 10.5 percent. Freds Fish House will:

A) make the investment since the cost is greater than the expected return.

B) Not make the investment since the cost is greater than the expected return

C) not make the investment since the cot is less than the expected return.

D) make the investment since the cost is less than the expected return.

At which of the market rates of interest below would Fred's Fish House be inclined to make the investment?

A) 3.5%

B) 3%

C) 2%

D) at any of these interest rates listed

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Sixta Kovacek
Sixta KovacekLv2
28 Mar 2019

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Related questions

Freds Fish House is contemplating an investment of $50,000 in a new shrimp boat and deep fryers. Management of this company predicts a 6.3 percent annual return on this investment. The current market rate of interest is 5.6 percent. Freds Fish House will:

A. not invest since the cost is greater than the expected return.

B. does not invest since the cost is less than the expected return.

C. invest since the cost is less than the expected return.

D. invest since the cost is greater than the expected return.

At which of the market rates of interest below would Fred's Fish House be inclined to invest?

A. 3.5%.

B. 3%.

C. 2%.

D. at any of these interest rates listed.

1. The multiplier helps explain

   

A. why a decrease in taxes causes real Gross Domestic Product (GDP) to fall by more than the amount of the decrease in taxes.
   

B. why a fall in investment cause real Gross Domestic Product (GDP) to rise by more than the amount of the decrease in investment.
   

C. why a rise in government expenditures causes real Gross Domestic Product (GDP) to rise by more than the amount of the increase in government spending.
   

D. why an increase in disposable income causes real Gross Domestic Product (GDP) to rise by less than the amount of the increase in disposable income.

 

2. If the marginal propensity to save (MPS) increases, the multiplier

   

A. decreases.
   

B. can either increase or decrease, depending on what happens to the marginal propensity to consume (MPC).
   

C. stays the same.
   

D. increases.

 

QUESTION 60

The investment function will shift when there is a change in

   

A. the opportunity cost of retained earnings.
   

B. firms' profit expectations.
   

C. the cost of borrowing.
   

D. the interest rate.

1.43 points

QUESTION 61

In the Keynesian model, whenever planned saving exceeds planned investment,

   

A. there will be unplanned inventory accumulation.
   

B. real GDP will not be influenced.
   

C. the interest rate will remain unchanged.
   

D. there will be unplanned inventory depletion.

 

1.43 points

QUESTION 62

In the Keynesian model, whenever planned saving is less than planned investment,

   

A. there will be unplanned inventory depletion.
   

B. the interest rate will remain unchanged.
   

C. there will be unplanned inventory accumulation.
   

D. real GDP will not be influenced.

 

1.43 points

QUESTION 63

Government purchases

   

A. are determined by the political process.
   

B. are determined by the public.
   

C. are influenced by interest rates.
   

D. are determined by suppliers.

 

1.43 points

QUESTION 64

If, at some level of output, total planned real expenditures are less than real Gross Domestic Product (GDP),

   

A. real GDP will either fall or remain unchanged, depending on the MPC.
   

B. real GDP will rise.
   

C. real GDP remains unchanged.
   

D. unplanned inventories will increase and real GDP will fall.

 

1.43 points

QUESTION 65

When the economy is operating at the equilibrium level of GDP, we know that

   

A. total planned real expenditures equal real GDP.
   

B. real net exports equal inventory changes.
   

C. planned real investment spending equals real net exports of zero.
   

D. total planned real consumption expenditures equal real GDP.

 

1.43 points

QUESTION 66

One divided by the marginal propensity to save (MPS) is the formula for

   

A. the inverse of the multiplier.
   

B. the multiplier.
   

C. one minus the multiplier.
   

D. autonomous consumption.

 

QUESTION 67

Thinking like an economist would, which is true of investment?

   

A. Investment represents spending on capital goods.
   

B. Investment is a stock concept.
   

C. Investment is putting money into stocks and bonds.
   

D. It is the portion of disposable income that is not used for consumption or saving.

 

QUESTION 68

Other things being equal, if input prices rise in a country, then there would be

   

A. cost-push inflation.
   

B. demand-pull inflation.
   

C. cost-pull deflation.
   

D. more production and a lower price level.

 

QUESTION 69

In the short run, if the price level rises, then the overall economy can temporarily produce beyond its nominal capacity. One reason for this is that

   

A. existing capital equipment can be used more intensively.
   

B. wage rates rise almost simultaneously with the price level.
   

C. the unemployment rate usually rises dramatically along with the price level.
   

D. workers can be switched from counted to uncounted production.

A $100 million increase in investment spending will cause read GDP to

Select one:

a. decrease by less than $100 million

b. increase by more than $100 million

c. increase by less than $100 million

d. decrease by $100 million

e. increase by $100 million

the marginal propensity to consume is 0.5, then a $100 million increase in investment spending will lead to an increase of real GDP by

Select one:

a. $100 million

b. $50 million

c. $150 million

d. $200 million

e. $300 million

When income is $1,000, the level of consumption spending is equal to $850. When income rises to $1,200 the level of consumption spending is equal to $1,000. In this case the value of the marginal propensity to consume is

Select one:

a. 0.80

b. 0.50

c. 0.75

d. 0.85

e. 0.83

The marginal propensity to consume measures the

Select one:

a. increase in consumer spending when investment spending rises by $1

b. increase in disposable income when consumer spending rises by $1

c. increase in consumer spending when disposable income rises by $1

d. increase in disposable income when investment spending rises by $1

e. increase in consumer spending when taxes rise by $1

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