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Homework answers / question archive / 1) The average U
1) The average U.S. citizens' share of the government debt represents less than 2 percent of a person's lifetime income.
True
False
2) Which of the following would likely increase private saving?
A) expansion of IRA type accounts, but not a consumption tax.
B) a consumption tax, but not expansion of IRA type accounts
C) both expansion of IRA type accounts and a consumption tax
D) neither expansion of IRA type accounts nor a consumption tax.
3) If real output grows at 3 percent per year and the inflation rate is 3 percent per year then government debt can grow by 6 percent per year and not increase the ratio of debt to income
True
False
4) If the MPC = 0.75, then the government purchases multiplier is about
| a.
1.33. |
|
| b.
4. |
|
| c.
3. |
|
| d.
7. |
Answer:
1.
TRUE , the average U.S citizens share of the government debt represents less than 2 percent of a person's lifetime income.
2.
Right Answer: ( C)
Both expansion of IRA type accounts and a consumption tax increases private saving. Individual Retirement Account (IRA) expansion means more income is being saved for retirement. Thus. in both cases, private saving witness rise.
3.
True
because nominal interest rate= real interest rate+Inflation rate=3+3=6%
since debt to output remains same when here output/income is taken as nominal GDP
4.
Ans- b.4
Explanation- Spending multiplier =1/mps.
mps= 1-mpc As mpc+mps=1
It is given mpc= .75
So, spending multiplier= 1/(1-.75)= 4
