Quiz #541 answers

• 1. The more "money" there is in the economy the lower will be its value.

Answer: False

• 2. A balanced 'budget' fiscal rule eliminates the cyclical sensitivity of the fiscal outcome to the automatic stabilisers.

Answer: False

• 3. Consumption adds to aggregate spending and imports represent spending lost to the domestic economy. The marginal propensity to consume (MPC) is conceptually the extra consumption that is induced for every extra dollar of national income. The marginal propensity to import (MPM) is similarly the extra spending on imports that is induced for every extra dollar of national income. If the MPC and MPM both rise by 0.1 then the impact on aggregate demand for every new dollar of national income generated will be neutral.

Answer: False