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Chapter 10: Macroeconomic objectives (page 196)
How can governments utilize fiscal policy?
It can be utilized as a demand management tool
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Why is investment spending unstable?
Which of the following scenarios will shift the investment demand curve right? Select one or more answers from the choices shown.
Business taxes increase.
The expected return on capital increases.
Firms have a lot of unused production capacity.
Firms are planning on increasing their inventories.
Irving owns a chain of movie theaters. He is considering whether he should build a new theater downtown. The expected rate of return is 15 percent per year. He can borrow money at a 12 percent interest rate to finance the project. Should Irving proceed with this project?
Yes
No
Suppose that disposable income, consumption, and saving in some country are \(200 billion, \)150 billion, and \(50 billion, respectively. Next, assume that disposable income increases by \)20 billion, consumption rises by \(18 billion, and saving goes up by \)2 billion. What is the economy鈥檚 MPC? Its MPS? What was the APC before the increase in disposable income? After the increase?
Precisely how do the MPC and the APC differ? How does the MPC differ from the MPS? Why must the sum of the MPC and the MPS equal 1?
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