ECO 372T Wk 3 - Apply: Quiz

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ECO 372T Wk 3 - Apply: Quiz

If the MPC in an economy is 0.75 and aggregate expenditures increase by $8 billion, then equilibrium GDP will increase by

Multiple Choice

• $32 billion.
• $2.75 billion.
• $6 billion.
• $40 billion.

Suppose the economy's multiplier is 5. Other things equal, a $40 billion decrease in government expenditures on national defense will cause equilibrium GDP to

Multiple Choice

• decrease by $200 billion.
• decrease by $80 billion.
• increase by $200 billion.
• decrease by $40 billion.
• remain unchanged.

Suppose that an economy produces 500 units of output. It takes 20 units of labor at $15 a unit and 6 units of capital at $50 a unit to produce this amount of output. The per unit cost of production is

Multiple Choice

• $1.20.
• $0.83.
• $2.40.
• $0.60.

If the marginal propensity to save is 0.1 in an economy, a $30 billion rise in investment spending will increase consumption by

Multiple Choice

• 270.
• 300.
• 30.
• 3.

If a $200 billion increase in investment spending creates $200 billion of new income in the first round of the multiplier process and $180 billion in the second round, the multiplier in the economy is

Multiple Choice

• 10.
• 5.
• 9.
• 2.

If the MPC is 0.9 and investment increases by $4 billion, the equilibrium GDP will

Multiple Choice

• increase by $40 billion.
• increase by $3.6 billion.
• decrease by $4.44 billion.
• increase by $4.44 billion.

Suppose that a new machine tool having a useful life of only one year costs $80,000. Suppose, also, that the net additional revenue resulting from buying this tool is expected to be $88,000. The expected rate of return on this tool is

Multiple Choice

• 10 percent.
• 90 percent.
• 9 percent.
• 1 percent.