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chapter 27.doc

48 Pages
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Department
Economics
Course Code
ECON 1010
Professor
Steven Edwards

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Economics Canada in the Global Environment 7e ParkinChapter 27 Expenditure Multipliers The Keynesian Model271 Fixed Prices and Expenditure Plans1 Disposable income is A used for consumption only B aggregate income minus taxes plus transfer payments C aggregate income plus transfer paymentsD aggregate income minus taxesE aggregate income minus transfer paymentsAnswerBDiff 2TopicFixed Prices and Expenditure Plans2 Dissaving occurs when a household A spends less than it receives in disposable income B spends more than it saves C saves more than it spends D consumes more than it receives in disposable income E borrows AnswerDDiff 1TopicFixed Prices and Expenditure Plans3 Complete the following sentence A householdA consumes or pays taxes out of disposable income B consumes saves or pays taxes out of disposable income C consumes or saves out of disposable income D only consumes out of disposable income E None of the above AnswerCDiff 1TopicFixed Prices and Expenditure Plans4 The marginal propensity to consume is the A fraction of the first dollar of disposable income received that is saved B fraction of the first dollar of disposable income received that is consumed C fraction of the last dollar of disposable income received that is saved D fraction of a change in disposable income that is spent on consumption E total amount of consumption divided by the total amount of disposable income AnswerDDiff 1TopicFixed Prices and Expenditure Plans1 2010 Pearson Education Canada5 The marginal propensity to consume is calculated as A consumption expenditure divided by the change in disposable income B the change in consumption expenditure divided by disposable income C consumption expenditure divided by total disposable income D the change in consumption expenditure divided by saving E the change in consumption expenditure divided by the change in disposable income AnswerEDiff 1TopicFixed Prices and Expenditure Plans6 The marginal propensity to save is calculated as A saving divided by disposable income B saving divided by the change in disposable income C the change in saving divided by the change in consumption expenditure D the change in saving divided by the change in disposable income E the change in saving divided by disposable income AnswerDDiff 1TopicFixed Prices and Expenditure Plans7 The marginal propensity to consume A is negative if dissaving is present B is greater than 1 if dissaving is present C is between 12 and 1 D is greater than 1 but less than 2 E is between zero and 1 AnswerBDiff 2TopicFixed Prices and Expenditure Plans8 The marginal propensity to save A equals 1MPC B is between zero and 12 C is greater than 1 D is greater than 1 but less than 2 E is negative AnswerADiff 2TopicFixed Prices and Expenditure Plans2 2010 Pearson Education Canada9 The sum of the marginal propensity to save and the marginal propensity to consumeA always equals 1 B sometimes equals 1 C always equals 0 D never equals 1 E is greater than zero but less than 1 AnswerADiff 1TopicFixed Prices and Expenditure Plans10 If the marginal propensity to save is 02 then A the marginal propensity to consume is larger than 08 B the marginal propensity to consume is 08 C the marginal propensity to consume is also 02 D the slope of the consumption function is 02 E the slope of the saving function is 08 AnswerBDiff 2TopicFixed Prices and Expenditure Plans11 If a households disposable income increases from 12000 to 22000 and at the same time its consumption expenditure increases from 4000 to 9000 then A the household is dissaving B the slope of the consumption function is 06 C the slope of the consumption function is 05 D the marginal propensity to consume over this range is negative E the marginal propensity to save over this range is negative AnswerCDiff 2TopicFixed Prices and Expenditure Plans12 If consumption expenditure for a household increases from 300 to 500 when disposable income increases from 200 to 500 the marginal propensity to consume is A equal to 1 B equal to 075 C equal to 133 D negative E equal to 067 AnswerEDiff 1TopicFixed Prices and Expenditure Plans3 2010 Pearson Education Canada
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