explain pls: just a couple of multiple choice qs... (1 Viewer)

[*Pooja*]

okay people. i know these may be stupid questions but could someone explain to me what is happening in these questions?

the first one:

a woman earning $35000 a year spends $20000 each year. Following a $10000 a year pay increase, the woman spends $23000. What is the woman's new average propensity to save?

(A) 0.49
(B) 0.51
(C) 0.63
(D) 0.70

(the answer is A.)

...and the second one:

if a country's marginal propensity to save is 0.4, what will be the total change in aggregate demand resulting from a $100 000 increase in government spending?

(A) 40
(B) 60
(C) 166
(D) 250

(the answer is D.)

so pls anyone who got the answer i would appreciate it if u could explain it seeing my eco trial is this monday!

thanks!

 

[kochou]

I don't have a calculator on hand... so don't blame me if I'm wrong

First one..

her income is now $45 000, spends $23 000, saves $22 000....
savings/total income = 22/45 = 0.49???


Second one..

multiplier = 1/MPS = 1/0.4 = 2.5.....err not sure about this one

 

[ben_ratus]

after u calculate the multiplier.. and we know that there is a 100,000 increase in gov spending.. so you just multiply the increase in gov spending by the multiplier

Y=k.AD

 

[*Pooja*]

ooh thanks! i get the first one. the second one still seems fuzzy though!

 

[kochou]

I thought so too... but that doesn't give an answer of 250 =/

 

[*Pooja*]

its weird and confusing! but it may just be simple and i just cant see it or something......

 

[masteraal]

if a country's marginal propensity to save is 0.4, what will be the total change in aggregate demand resulting from a $100 000 increase in government spending?

(A) 40
(B) 60
(C) 166
(D) 250

(the answer is D.)


the answer should be 100grand
i got a leading edge question wrong coz it was a trick q
an increase of 100grand of gov spending is still 100 grand in AD
as AD=C+I+G+(X-M)
everything else being equal and increase in 100000 in G is equal to an increase in 100000 in AD

HOWEVER an increase of 100000 in G on national income would be 250000

yeah i know its fucked up...i was bitching about that too

 

[kochou]

But 100 000 isn't an option..????

 

[kochou]

if a country's marginal propensity to save is 0.4, what will be the total change in aggregate demand resulting from a $100 000 increase in government spending?

(A) 40
(B) 60
(C) 166
(D) 250

(the answer is D.)


the answer should be 100grand
i got a leading edge question wrong coz it was a trick q
an increase of 100grand of gov spending is still 100 grand in ADas AD=C+I+G+(X-M)
everything else being equal and increase in 100000 in G is equal to an increase in 100000 in AD

HOWEVER an increase of 100000 in G on national income would be 250000

yeah i know its fucked up...i was bitching about that too

I don't quite get the difference :/
What's the difference between increase in G on AD and increase in G on Y ?? I thought AD = Y ???

 

[ar5ena1]

Don't know what the hell thats on about. D.

 

[*Pooja*]

if a country's marginal propensity to save is 0.4, what will be the total change in aggregate demand resulting from a $100 000 increase in government spending?

(A) 40
(B) 60
(C) 166
(D) 250

(the answer is D.)


the answer should be 100grand
i got a leading edge question wrong coz it was a trick q
an increase of 100grand of gov spending is still 100 grand in AD
as AD=C+I+G+(X-M)
everything else being equal and increase in 100000 in G is equal to an increase in 100000 in AD

HOWEVER an increase of 100000 in G on national income would be 250000

yeah i know its fucked up...i was bitching about that too

um......im sorry but i dont get it. i was with u until you said: "everything else being equal....'
what exactly is everything after that trying to say?