FPEC1014 TUTORIAL 5

The ratio of a change in consumption to a change in national income is known as

?.

• marginal propensity to consume

• marginal propensity to save

• average propensity to consume

• average propensity to save

What is autonomous expenditure?

• household consumption when income is zero

• zero household expenditure

• household consumption that is equal to income

• household expenditure that is maximized

Given

1 / [1 – MPC]

The formula above is to calculate ?.

• depreciation

• net exports

• savings

• multiplier

Which of the following is a component of injections in the economy?

• savings

• government expenditure

• taxes

• imports

In a closed economy, a RM 200 million increase in investment will increase national income by RM 400 million. What is the value of marginal propensity to save in this economy?

• 0.5

• 0.6

• 1.0

• 1.2

The basic idea behind the multiplier principle is that an increase in ?.

• GDP will bring about a larger increase in equilibrium GDP

• government spending causes a larger increase in tax revenues

• investment expenditure will cause a larger increase in equilibrium GDP

• consumer spending causes a larger increase in investment spending

Which of the following changes causes a leftward shift in the investment curve?

• technological advancement

• optimism about future profitability

• an increase in business taxes

• a fall in the price of raw materials

If the marginal propensity to save (MPS) is 0.1, a RM 100 million increase in investment will cause an output increase of .

• RM 900 million

• RM 1000 million

• RM 1200 million

• RM 1400 million

The function for consumption (C), investment (I), government expenditure (G) and tax (T) in a three-sector economy are shown as below.

C = 200 + 0.75Yd I = 100

G = 50

T = 20

Calculate the equilibrium national income in the economy.

Based on the table above, calculate the value of MPC .