Imagine a hypothetical economy that has no foreign trade and is initially in equilibrium. Assume that the marginal propensity to consume (MPC) in this economy is 0.75, the marginal propensity to import (MPI) is 0.10, and there are no taxes. Then a decline in government spending by $60 million will result in a total reduction in equilibrium income of:

Hence, the correct answer is $ 171.43 million

Explanation:

Multiplier = 1/(1 - MPC(1 - t) + MPI)

where MPC = Marginal propensity to consume = 0.75, MPI = Marginal propensity to import = 0.10, t = tax rate and here tax rate = 0.

Thus Multiplier = 1/(1 - 0.75(1 - 0) + 0.10) = 1/0.35 = 20/7

Interpretation of this multiplier :

$1 increase in autonomous expenditure will result in increase in equilibrium income by $(20/7) or $1 decrease in autonomous expenditure will result in decrease in equilibrium income by $(20/7).

As government spending is considered as autonomous(i.e. independent of Income) thus decrease in $60 million of government spending will result in decrease in equilibrium income by (20/7)* 60 million = 171.43 million.

c

explanation:

c because the item on a bank statement is also referred to as an account statement. in addition, it provides the beginning balance, ending balance, statement date, transaction date for each transaction, payee, customer name and address, statement period, the account holder's account number, and the bank's customer service number

answer; read and consider the content of the items;