State whether each statement is TRUE, FALSE or UNCERTAIN, giving a brief explanation.
State whether each statement is TRUE, FALSE or UNCERTAIN, giving a brief explanation If the government runs a budget surplus and the private sector invests less than it saves there must be a balance of payments surplus. An increase in disposable income decreases the average propensity to save. In a Keynesian economy with proportional taxes, if the rate of indirect tax is increased and the rate of direct tax is decreased by the same amount national income will go up The larger is the marginal propensity to consume the less steep is the IS curve. A decrease in the price level shifts the LM curve to the right. In a fixed price IS/LM model with a lump sum direct tax, the balanced budget multiplier is equal to one. If the non-bank public decides to hold a lower ratio of cash to deposits the interest rate will fall In an IS/LM economy an increase in autonomous consumption expenditure increases the price of bonds. In a classical economy, a decrease in the money supply decreases the interest rate. In the Quantity Theory of Money, a decrease in real national income will not change the price level.