Exam (elaborations)

ECS1601 Assignment 5 Semester 2 2024 (95%)

10 purchases

Course
Economics IB (ECS1601)

Institution
University Of South Africa (Unisa)

ECS1601 assignment 5 semester 2 2024 (95%) Exam (elaborations) Economics IB (Macroeconomics I) (ECS1601)

[Show more]

Preview 2 out of 12 pages

View example

Uploaded on September 19, 2024
Number of pages 12
Written in 2024/2025
Type Exam (elaborations)
Contains Questions & answers

semester 2

TeachmeTutor Member since 1 year 30 documents sold

UNISA  2024  ECS1601-24-Y  Online assessments  Assessment 5

QUIZ

Started on Thursday, 19 September 2024, 7:01 AM
State Finished
Completed on Thursday, 19 September 2024, 9:04 AM
Time taken 2 hours 3 mins
Marks 19.00/20.00
Grade 95.00 out of 100.00

Question 1
Correct

Mark 1.00 out of 1.00

When the tax rate decreases, the size of the multiplier___________. As a result, the equilibrium level of income
will_____________.

a. decreases; increase

b. increases; remain unchanged

c. decreases; decrease

d. increases; increase 

Your answer is correct.

When the tax rate is added, it reduces the consumption function, the size of the multiplier decreases, and as a result, the
equilibrium level of income also decreases. When the tax rate decreases, the disposable income increases, and the size of
the multiplier also increases. As a result, the equilibrium level of income increases.

, Question 2

Correct

Mark 1.00 out of 1.00

The value of the multiplier is necessarily increased if

a. the marginal propensity to consume increases and the marginal propensity to import falls. 
b. the marginal propensity to consume falls and the tax rate falls.
c. the marginal propensity to consume and the marginal propensity to import rise.
d. the income tax rate falls and the marginal propensity to import rise.

In the discussion of the previous question, we explain that the multiplier will increase when the marginal propensity to
consume increases, when the tax rate decreases and when the marginal propensity to save decreases.

When the marginal propensity to import increases, it means that a larger part of an increase in income is not spent on goods
produced in our economy, thus decreasing the multiplier effect of any increase in autonomous spending. Thus, the multiplier
will increase when the marginal propensity to import decreases. This relationship is illustrated by the following formula from
section 6.7: ∝ =1/(1-c(1-t)+m) + - - Where c is the marginal propensity to consume, t is the tax rate and m is the marginal
propensity to import. The signs underneath each symbol indicate its relationship with the multiplier (α). c has a positive
relationship with α (see the + sign under c).
A positive relationship means that an increase in c will increase α. Conversely t and m have a negative (or inverse)
relationship with α. This means that if the tax rate or the marginal propensity to import increase then the multiplier will
decrease in size. The marginal propensity to save also has a negative relationship with the multiplier since an increase in s
must mean a decrease in c, since c + s = 1. The sizes of the changes are not mentioned in the, therefore we can only assume
that the value of the multiplier increases when both variables mentioned in an option has a positive effect on the size of the
multiplier. An increase in the marginal propensity to consume and a decrease in the marginal propensity to import will
definitely increase the multiplier, regardless of the size of the changes in the propensities.

Question 3
Correct

Mark 1.00 out of 1.00

The introduction of the foreign sector in the Keynesian model______ the slope of the consumption function. As a result, the
multiplier becomes______.

a. increases; larger
b. reduces; smaller 
c. increases; smaller
d. reduces; larger

When the foreign sector is introduced, the slope of the consumption function is reduced further. As a result, the multiplier
becomes even smaller. Please see example in page 156 of the prescribed book.

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying this summary from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller TeachmeTutor. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy this summary for R55,00. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

66184 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy summaries for 15 years now

Start selling

Exam (elaborations)

ECS1601 Assignment 5 Semester 2 2024 (95%)

Document information

Subjects

Written for

Seller

Reviews received

Content preview