CHAPTER 7A: MULTIPLIER EFFECT

The reason that the increase in autonomous spending leads to a larger increase in equilibrium output is?

• When output increases, prices rise and this causes output to continue to increase

• When output increases, households reduce savings and thus increase consumption, leading to an increase in aggregate demand

• When businesses increase output to meet demand, this in turn will increase consumption

• The multiplier increases along with the increase in autonomous spending

In a simple economy, if autonomous consumption (Co) is 50, autonomous investment (Io) is 30, and the marginal propensity to save (Sm) is 0.1. The equilibrium output level (Ycb) is:

• 700

• 800

• 900

• 1000

The multiplier of aggregate demand is a coefficient:

• Reflects the change in output when the Government changes spending by one unit

• Reflects the change in output when aggregate demand changes by one unit compared to the initial amount.

• Reflects the change in aggregate demand when output changes by one unit

• All three answers above are incorrect

When the multiplier effect of aggregate demand brings the economy to a new equilibrium point, at that time, the autonomous aggregate demand will?

• Change by the same amount as the change in actual output

• Change is usually smaller than the change in actual output

• Change is always greater than the change in actual output.

• Not change.

If household consumption expenditure increases from 500 thousand VND to 800 thousand VND when disposable income increases from 2 million VND to 3 million VND, what will be the marginal consumption tendency (Cm)?

• 0.5

• 1

• 0.7

• 0.3

Assuming in a simple economy, the marginal propensity to save is 0.25; there is only autonomous investment, what is the multiplier of aggregate demand?

• 2

• 4

• 6

• 8

Assuming in an economy we have: marginal propensity to consume (Cm) equal to 0.8; marginal tax rate (Tm) equal to 0.2; marginal propensity to invest (Im) equal to 0.1; marginal propensity to import (Mm) equal to 0.14, what will be the multiplier of aggregate demand?

• 2

• 3

• 2.5

• 4

In a simple economy, if autonomous investment (Io) increases by an amount of 15 and the marginal propensity to consume (Cm) is 0.8, while the marginal propensity to invest (Im) is 0.

The level of output will:

• Increase by 19

• Increase by 27

• Increase by 75

• All three answers above are incorrect

If there is a decrease in private investment of 10 billion, the marginal propensity to consume is 0.75, and the marginal propensity to invest is 0, the output level will:

• Decrease to 40 billion

• Increase to 40 billion

• Decrease to 13.33 billion

• Increase to 13.33 billion

In a simple economy, the data is as follows:

C = 120 + 0.7Yd

I = 50 + 0.1Y

Calculate the equilibrium output of this economy.

• 850

• 1000

• 900

• 700