In the Simple Aggregate Expenditure Model Where All Components of Aggregate

question 203

Multiple Choice

In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption, suppose when autonomous aggregate expenditures rise by $500 billion, equilibrium real GDP increases by $2,500 billion. Which of the following statements is true?

• A) The MPS = 0.8.
• B) The MPC = 0.2
• C) The MPS = 0.2.
• D) The MPC = 5.

---

Definitions:

Conservation

The principle in cognitive development where a child recognizes that quantity remains the same despite changes in its shape or form.

Short, Wide Glass

A container for liquids that is notably lower in height but broader in width, affecting the perception of content volume.

Soda

A sweet, carbonated beverage, often flavored and containing caffeine and other additives.

Curse Of Knowledge

A cognitive bias that occurs when an individual, knowing something, finds it hard to think about the subject from the perspective of someone less knowledgeable.