M
mgh
Member
Hi, I'm struggling with a couple of MCQs - if anyone is able to explain them it'd be very much appreciated!
1) In an open economy with no taxation, the marginal propensity to save is 0.25 and the
level of income is €800m. What is the likely level of consumption expenditure
resulting from a rise in government expenditure of €100 million? (Answer is C - my thoughts are the multiplier = 1/0.25 so increase in Y due to increase in G is 400, Y = C + S => Y = C + 0.25S => 1200 = C + 0.25*1200 which results in C = 900 just not sure if that's the correct way)
A €700 million
B €800 million
C €900 million
D €1000 million
2) If planned injections are less than planned withdrawals: ( Answer is B - I thought if planned injections are less than withdrawals then exports will be less than imports so the balance of trade would worsen)
A unemployment will fall.
B the balance of trade will tend to improve.
C inflation will tend to rise.
D national income will rise.
3)5,000 bottles of a soft drink are demanded when the price for each bottle is £5. When
the price is £6 only 4000 bottles are demanded. The marginal revenue from
increasing the price is: (Answer is C - I thought it would be 6*4000-5*5000 = -1000)
A +£1,000.
B -£1,000.
C +£1.
D -£1.
Thanks in advance
1) In an open economy with no taxation, the marginal propensity to save is 0.25 and the
level of income is €800m. What is the likely level of consumption expenditure
resulting from a rise in government expenditure of €100 million? (Answer is C - my thoughts are the multiplier = 1/0.25 so increase in Y due to increase in G is 400, Y = C + S => Y = C + 0.25S => 1200 = C + 0.25*1200 which results in C = 900 just not sure if that's the correct way)
A €700 million
B €800 million
C €900 million
D €1000 million
2) If planned injections are less than planned withdrawals: ( Answer is B - I thought if planned injections are less than withdrawals then exports will be less than imports so the balance of trade would worsen)
A unemployment will fall.
B the balance of trade will tend to improve.
C inflation will tend to rise.
D national income will rise.
3)5,000 bottles of a soft drink are demanded when the price for each bottle is £5. When
the price is £6 only 4000 bottles are demanded. The marginal revenue from
increasing the price is: (Answer is C - I thought it would be 6*4000-5*5000 = -1000)
A +£1,000.
B -£1,000.
C +£1.
D -£1.
Thanks in advance