Mod 3.2: Multipliers

What does MPC stand for?

• maximum price control

• monetary policy committee

• marginal propensity to consume

• macro-policy coordination

• market power calculation

What is the formula for calculating MPC?

• income – (inflation + taxes + expenses)

• (change in inflation) x (change in disposable income)

• (change in income) – (change in taxes)

• (change in consumer spending) / (change in disposable income)

• income x inflation x consumer optimism

If the MPS is equal to 0.1, what is the value of MPC?

• 0.1

• 0.2

• 0.5

• 0.8

• 0.9

Which of the following has the biggest impact on investment spending?

• consumption

• inflation

• interest rates

• government spending

• price level

As the MPC increases:

• the expenditure multiplier will increase.

• the expenditure multiplier will not change.

• the tax multiplier will increase.

• the tax multiplier will not change.

• the expenditure multiplier and the tax multiplier will decrease.

If MPC = MPS, then the value of the spending multiplier is:

• Infinity

• 2

• 1

• 0

• MPC

Which of the following is true about the Consumption Function? (CHOOSE ALL THAT APPLY)

• It can be used to calculate consumer optimism.

• It measures consumer spending based on disposable income.

• It can be used to calculate the current rate of unemployment.

• It has a negative slope based on the demand curve.

• It has a positive slope equal to MPC.