Multiple Choice Questions on Consider two economies that are identical with the exception that one has a high marginal propensity........... for SEBI Grade A ( Officer) Exam Preparation

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Multiple Choice Questions

Consider two economies that are identical with the exception that one has a high marginal propensity...........

Economics- Phase (I & II) Investment Function 
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    Consider two economies that are identical, with the exception that one has a high marginal propensity to consume (MPC) and one has a low MPC. If the money supply is increased by the same amount in each economy, the high MPC economy will experience. 

     A larger increase in output and a smaller decrease in the interest rate.

    Correct Answer

    A smaller increase in output and a smaller decrease in the interest rate.

    Incorrect Answer

    A larger increase in output and a larger decrease in the interest rate.

    Incorrect Answer

     A smaller increase in output and a larger decrease in the interest rate.

    Incorrect Answer

    None of the above. 

    Incorrect Answer
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    Explanation:

     There is a flatter IS curve in the high MPC economy

    By: Jyoti Das
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