Question : The value of the spending multiplier ranges between:
Option 1: 0 and 1
Option 2: 1 and 2
Option 3: 2 and 3
Option 4: 3 and 4
Correct Answer: 2 and 3
Solution : The correct answer is (c) 2 and 3
When the marginal propensity to consume (MPC) is between 0 and 1, the value of the spending multiplier will be greater than 1. Typically, it falls within the range of 2 and 3. For example, if the MPC is 0.8, the spending multiplier would be 1 / (1 - 0.8) = 5, indicating that a $1 increase in autonomous expenditure would result in a $5 increase in real GDP.
Question : The value of the multiplier is calculated as:
Option 1: 1 / MPS
Option 2: 1 / MPC
Option 3: 1 / (1 - MPC)
Option 4: 1 / (1 - MPS)
Question : Expansionary fiscal policy involves:
Option 1: Decreasing government spending and increasing taxes
Option 2: Increasing government spending and increasing taxes
Option 3: Decreasing government spending and decreasing taxes
Option 4: Increasing government spending and decreasing taxes
Question : The market value of equity shares is determined by:
Option 1: Face value
Option 2: Book value
Option 3: Earnings per share
Option 4: Demand and supply factors
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