AP Macro MPC MPS Review

If Karl increases his saving from $1,500 to $1,700 and his disposable income increases from $45,000 to $49,000, what is his MPC?

• .5

• 1

• 1.5

• 2

Which of the following equations is correct?

• $\frac{MPC}{MPS}=1$

• Multiplier = $\frac{1}{MPC}$

• MPS = MPC

• MPC + MPS = 1

The MPC and MPS are equal to each other because:

• it's the law of economics

• you can only consume as much as you save

• you can only save as much as you consume

• you can only save money or spend it

What is the relationship between MPC, MPS and the Mulitplier?

• You need either MPC or MPS to help you find the multipler

• You need MPC not MPS to help you find the multiplier

• You need MPS not MPC to help you find the multiplier

• You don't need either to help you find the multiplier

What is the point of the multiplier?

• It helps to see the ripple effect a change in spending or saving has

• It helps to see how much more money we can make if we save $1

• It helps to see how much more money we lose if we save $1

• It helps to see how much more money the government makes

The multiplier effect shows

• How spending is magnified in the economy

• How much consumers can spend from their paychecks

• How much the government can spend from their budget

• How often the economy can survive recessions

If the spending multiplier is 5, the value of the tax multiplier must be

• 5

• 4

• 1

• -4

• -5

An increase in personal income taxes will most likely result in which of the following changes in real GDP and the price level in the short run?

Real GDP/Price level

• Decrease/Decrease

• Decrease/Increase

• Increase/No change

• Increase/Increase

• Increase/No change

An increase in the marginal propensity to consume causes an increase in which of the following?

• Marginal propensity to consume

• marginal propensity to saave

• tax multiplier

• spending multiplier

To combat a recessionary gap, we use

• contractionary policy

• recessionary policy

• inflationary policy

• expansionary policy