. Additionally note that consumption is given by: ( ) You also know that: ? ? ? ? Furthermore you know that the marginal propensity to save (MPS) equals 0.4 Calculate the following: a. Marginal propensity to consume (MPC) b. Government spending multiplier c. Tax multiplier d. e. Government Deficit Document Preview: ECO 2020 Sec 019 Fall Wayne State University Instr: Matthias Jung Name: QUIZ 8+9 Due in class 12/01/12 Please answer all questions. Show all your work. Good luck! 1. (10 points, 2 each) Consider our standard formula for GDP: . Additionally note that consumption is given by: ( ) You also know that: ? ? ? ? Furthermore you know that the marginal propensity to save (MPS) equals 0.4 Calculate the following: a. Marginal propensity to consume (MPC) b. Government spending multiplier c. Tax multiplier d. e. Government Deficit ECO 2020 Sec 019 Fall Wayne State University Instr: Matthias Jung ECO 2020 Sec 019 Fall Wayne State University Instr: Matthias Jung 2. (10 points, 2 each) Use the AD curve and IA line to explain (graphically) what happens to the inflation adjustment line in the long run in each of the following cases. a. The economy sinks into a recession. b. Firms expect the Fed will adjust monetary policy and allow inflation to rise from 2 percent to 4 percent. c. OPEC successfully doubles the price of oil on the market. d. Congress cuts taxes. e. Potential GDP increases. ECO 2020 Sec 019 Fall Wayne State University Instr: Matthias Jung END OF QUIZ Attachments: quiz8-9.pdf; . Additionally note that consumption is given by: ( ) You also know that: ? ? ? ? Furthermore you know that the marginal propensity to save (MPS) equals 0.4 Calculate the following: a. Marginal propensity to consume (MPC) b. Government spending multiplier c. Tax multiplier d. e. Government Deficit Document Preview: ECO 2020 Sec 019 Fall Wayne State University Instr: Matthias Jung Name: QUIZ 8+9 Due in class 12/01/12 Please answer all questions. Show all your work. Good luck! 1. (10 points, 2 each) Consider our standard formula for GDP: . Additionally note that consumption is given by: ( ) You also know that: ? ? ? ? Furthermore you know that the marginal propensity to save (MPS) equals 0.4 Calculate the following: a. Marginal propensity to consume (MPC) b. Government spending multiplier c. Tax multiplier d. e. Government Deficit ECO 2020 Sec 019 Fall Wayne State University Instr: Matthias Jung ECO 2020 Sec 019 Fall Wayne State University Instr: Matthias Jung 2. (10 points, 2 each) Use the AD curve and IA line to explain (graphically) what happens to the inflation adjustment line in the long run in each of the following cases. a. The economy sinks into a recession. b. Firms expect the Fed will adjust monetary policy and allow inflation to rise from 2 percent to 4 percent. c. OPEC successfully doubles the price of oil on the market. d. Congress cuts taxes. e. Potential GDP increases. ECO 2020 Sec 019 Fall Wayne State University Instr: Matthias Jung END OF QUIZ Attachments: quiz8-9.pdf
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