Econ

Econ 2123 Problem Set 2 Instructor: Wenwen Zhang TA: Mike Cheng Lecture: L5, L6 Due date & Homework Submission Location: Before 10/14 Tue 5:30p.m. Dropbox on the LSK 6th floor (Outside Econ Department) Name: _________________________________ Student ID: _____________________________ Lecture: ________________________________ Multiple Choices

  1. Which of the following would NOT be considered part of fixed investment spending (I)? A) Toyota buys a new robot for its automobile assembly line. B) Apple computer builds a new factory. C) Exxon increases its inventories of unsold gasoline. D) An accountant buys a newly built home for herself and her family. E) all of the above

  2. Suppose the consumption equation is represented by the following: C = 250 + .75YD. Given this information, the marginal propensity to save is A) .25. B) .7. C) 1. D) 4. E) none of the above

  3. Which of the following events will cause a reduction in equilibrium output? A) an increase in the marginal propensity to save B) an increase in taxes C) a reduction in the marginal propensity to consume D) all of the above E) none of the above

  4. If C = 2000 + .9YD, what increase in government spending must occur for equilibrium output to increase by 1000? A) 100 B) 200 C) 250 D) 500 E) 1000

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5. Based on our understanding of the model presented in Chapter 3, we know that an increase in c1 (where C = c0 + c1YD) will cause A) the ZZ line to become steeper and a given change in autonomous consumption (c0) to have a smaller effect on output. B) the ZZ line to become steeper and a given change in autonomous consumption (c0) to have a larger effect on output. C) the ZZ line to become flatter and a given change in autonomous consumption (c0) to have a smaller effect on output. D) the ZZ line to become flatter and a given change in autonomous consumption (c0) to have a larger effect on output.

  6. Which of the following about IS relation is NOT correct? A) It...