Module 16 MCQ Practice 1. In the nation of Xela , if people get $1 in new income, they tend to spend $0.75 and Save $0.25. Therefore, the_ _is multiplier; 25 b. marginal propensity to consume; 0.25 . marginal propensity to save; 0.75 d. marginal propensity to consume; 0.75 e. multiplier, 0.75 2. Which of the following represents the formula for the government spending multiplier? 1. 1 / (1 - MPC) 11. 1 / MPS III. A GDP / A G a. Ionlv b. ll only c. Ill onlv d. I and ll only e. I, II and Ill 3. If Maria Escalera's disposable income increases from $600 to $650 and her level of personal consumption expenditures increases from $480 to $520, you may conclude that her marginal propensity to a. consume is 0.8. b. consume is 0.4. C. consume is 0.25. d. save is 0.8. e. save is 0.25. 4. Investment demand increases as the result of a. excess productive capacity. b. an increase in corporate business taxes. c. businesses becoming more optimistic with respect to future business conditions. d. recessions in foreign nations that trade with the United States, causing a lower demand for U.S. products. e. a increase in the real interest rate. 5. The numerical value for the spending multiplier increases as the value of the a. MPS decreases. b. APC increases. c. MPC decreases. d. MPS increases. e. APC decreases. 6. If the spending multiplier is 5, the value of the tax multiplier must be a. 5. b. -4. C. 4. d. -5. e . 1