If an Economy's MPC Is 0

question 93

Multiple Choice

If an economy's MPC is 0.8 and the MPM is 0.05, then an increase in government spending of $2,000 will increase income by

• A) $5,500.
• B) $8,000.
• C) $10,000.
• D) $20,000.

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Definitions:

Monopolistic Competitor

A firm that operates in a market with many other firms offering similar but not identical products, leading to competitive pricing and product differentiation.

Monopolistically Competitive

A market structure characterized by many firms selling similar but not identical products, allowing for some degree of market power and price control by individual firms.

Resource Allocation

The process of distributing available resources among various projects or business units.

Monopolistic Competition

A market framework where numerous sellers present unique products, granting them a certain level of influence over the market.