Accepting Milton Friedman's permanent income hypothesis, calculate the marginal propensities to consume (MPCs) for each of the four scenarios.
Answer to relevant QuestionsFor each of the three income levels shown, pro vide appropriate data to satisfy or be consistent with the absolute and relative income hypotheses. If you live in Morocco, you don't have to love soft drinks to appreciate Coca-Cola's contribution to the Moroccan economy. Explain. Professor Arvind Jaggi asks his students at Franklin and Marshall College: "Building schools is not only good for students but for many non students as well." Who are these nonstudents? Explain why they benefit. "The economy's in equilibrium!" Is that necessarily good? Explain how interactions of the multiplier and accelerator generate cycles of national income.
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