Question : 41) Consider an open economy that has a marginal propensity : 1384383

41) Consider an open economy that has a marginal propensity to import equal to 0.30. If national income rises by $2500, imports will rise by

A) $30.

B) $300.

C) $750.

D) $7500.

E) $8333.

42) Suppose exports (X)=100, Y=500, and imports are equal to mY, where m is the marginal propensity to import. Net exports would be equal to zero if the marginal propensity to import were

A) 1%.

B) 5%.

C) 10%.

D) 20%.

E) 50%.

43) When compared to a simple macroeconomic model (with only consumption and investment), adding government and foreign trade to the AE function causes

A) the autonomous component of AE to increase.

B) the autonomous component of AE to fall.

C) the AE function to become downward sloping.

D) the AE function to become perfectly horizontal.

E) no change in the AE function.

44) The AE function for an open economy with government can be written as

A) AE = C + I – G + (X-IM).

B) AE = C + I + G – (X-IM).

C) AE = C + I – G – (X+IM).

D) AE = C + I + S + (X+IM).

E) AE = C + I + G + (X-IM).

45) Consider the general form of the consumption function in a simple macro model. Once government and taxes are included in the model, desired consumption can be expressed as ________, where a = autonomous consumption, t = net tax rate, Y = national income, = disposable income, and MPC = marginal propensity to consume.

A) C = a + MPC(1 – t)

B) C = a – (1 – t)

C) C = a + MPC ? Y

D) C = a + MPC ? t ?

E) C = a + MPC(1 – t)Y

46) In our simple macro model with government, which statement is correct regarding the following equation:              T = (0.2)Y?

A) Total tax revenues are equal to 20% of disposable income.

B) Total tax revenues are equal to 20% of real GDP.

C) Net tax revenues are equal to 20% of disposable income.

D) If national income increases by $1.00, then net tax revenue increases by $0.20.

E) If total tax revenue increases by $0.20, then national income increases by $1.00.

47) In our simple macro model with government, which statement is correct regarding the following equation:               = (0.75)Y?

A) If disposable income increases by $0.75, then national income increases by $1.00 and total tax revenue rises by $0.75.

B) Net tax revenue is equal to 75% of national income.

C) If national income increases by $1.00, then disposable income increases by $0.75 and net tax revenue increases by $0.25.

D) Net tax revenue is equal to 25% of disposable income.

E) If national income increases by $1.00, then disposable income increases by $0.25 and net tax revenue increases by $0.75.

48) In our simple macro model with government and foreign trade, the marginal propensity to consume out of disposable income is ________ whereas the marginal propensity to consume out of national income is ________.

A) MPC; MPC(1 – t)

B) MPC(1 – t); MPC

C) MPC(1 – t) – m; MPC(1 – t)

D) MPC; MPC(1 – t) – m

E) MPC(1 – t); MPC(1 – t) – m

49) Consider a consumption function in a simple macro model with government and taxes. Given a marginal propensity to consume out of disposable income of 0.9 and a net tax rate of 10% of national income, the marginal propensity to consume out of national income is

A) 0.09.

B) 0.72.

C) 0.81.

D) 0.90.

E) 1.00.

50) Consider a consumption function in a simple macro model with government and taxes. Given a marginal propensity to consume out of disposable income of 0.8 and a net tax rate of 20% of national income, the marginal propensity to consume out of national income is

A) 0.36.

B) 0.64.

C) 0.80.

D) 0.90.

E) 1.00.