If households save 30 billion more at each level of income and the marginal propensity to consume (MPC) is 0.9, the aggregate expenditure line will _____.
a. intersect the 45-degree line at a real GDP of 30 billion
b. shift upward by 30 billion
c. shift downward by 30 billion
d. shift upward by 300 billion because of the multiplier effect
e. shift downward by 300 billion because of the multiplier effect
QUESTION 2The economically efficient car is the one with the lowest emissions.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 3If the Fed increases the required reserve ratio at a time when banks are holding excess reserves, then:
a. the Fed's aim is to increase the money supply.
b. banks are likely to lend out more money than they would if the Fed left the reserve ratio alone.
c. banks are likely to earn higher profits than they would.
d. the money supply will not increase as much as it would if the Fed left the reserve ratio alone.
e. the Fed's aim is to conduct open market operations without changing the money supply.
QUESTION 4In the income-expenditure model, if autonomous saving increases by 15 billion, _____.
a. the aggregate expenditure line shifts upward by 15 billion
b. planned investment increases by 15 billion
c. the aggregate expenditure line shifts downward by 15 billion
d. planned investment decreases by 15 billion
e. the equilibrium level of real GDP demanded decreases by 15 billion
QUESTION 5A pollution tax that is exactly equal to marginal external cost will shift the market supply curve to the social-cost supply curve. This tax will thus correct the market inefficiency due to negative externalities by causing price to reflect the full marginal cost of production.
a. True
b. False
Indicate whether the statement is true or false
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