Homework Answers
Ans 1: (D) There is excess supply of money at 4% rate which is equal to the distance from point a to b.
Ans 2: (C) Increase by $360 billion. (Change in income = 6 x $60 billion = $360 billion).
Ans 3: MPC = Change in consumption expenditure / change in income
= $1,600 / $2,000 = 0.8 = MPC
Multiplier = 1/(1-MPC) = 1/0.2 = 5
Therefore, option (C) is correct.
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