Afall in the market interest rate makes any investment project: 0 a. less profitable if the funds were borrowed and more protable if it came from retained earnings. 0 b. less profitable whether the funds were borrowed or came from retained earnings. 0 c. more protable whether the funds were borrowed or came from retained earnings. 0 d. more protable only if the funds were borrowed. QUESTION 25 2 points Save Answer The answer is: 1/(1 - MPC). What is the question? 0 a.What is the marginal propensity to save? 0 b. What is marginal propensity to consume? 0 c, What is marginal propensity to consume? 0 d.What is the multiplier? QUESTION 26 2 points Save Answer If overall inventories rise over time because of an increase in unplanned inventory investment, one can conclude that: O a. the economy is slowing down. 0 b. sales were more than had been forecast. O c. inventory investment is negative. 0 d. the accelerator principle was contradicted. QUESTION 27 2 points Save Answer A consumption function is a statement that shows the relationship between interest rates and consumption. 0 True 0 False QUESTION 28 2 points Save Answer According to Income-Expenditure Equilibrium Model, when income is zero consumption is also zero. 0 True 0 False QUESTION 29 14 points Save Answer CountryA with a civilian population of 165 mil (all over age 16), has 103 mil employed and 17 mil unemployed persons, of which 2 mil is frictionally unemployed and another 4 mil structurally unemployed. a) What is the size of the labor force in millions? b) What is the actual unemployment ? c) What is the natural @ of unemployment? d) What is the cyclical unemployment E? e) Number of people not in the labor force? 1) Is this economy in a recession or a boom? g) Explain (The answer can be given in one sentence) Real GDP 45 line 800 700 I(AD) #TE = C + 1 009 500 450 Total Expenditures (billions of dollars) 400 300 200 100 0 100 200 300 400 500 600 700 800 Real GDP (billions of dollars) Refer to Exhibit 10-5 above and answer all questions below: a) Choose a level of Real GDP that is not at equilibrium where AD = Real GDP $ b) If autonomous consumption (Co) decreases, it follows that TE (or AD) will shift upward/downwardot be affected at all. c) If Real GDP stands at $600 billion, inventories will Fall/Rise/Remain Unchanged.d) If Real GDP is $600 billion, rms will most likely (chose either I, H, or HI) 1. Increase production to increase inventories to their optimum levels. 11. Will neither increase nor decrease production since the economy is in equilibrium 111, Will cut back production to reduce inventories to their optimum levels e) Suppose full employment level of Real GDP is at $600 bill and the economy is currently at $400 bill level of Real GDP. If the income multiplier is estimated to be 35, by how much should Autonomous Consumption (Co) change to push the level of Real GDP to change to reach the full employment level of Real GDP at the $600 bill? $Co =
