If an Economy's MPC Is 0

question 23

Multiple Choice

If an economy's MPC is 0.95 and the MPM is 0.05, then an increase in government spending of $1,000 will increase income by

• A) $900.
• B) $4,500.
• C) $10,000.
• D) $20,000.

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Definitions:

Production Increase

An upsurge in the amount of goods or services produced by a company within a specific time frame.

Variable Cost

Costs that change in proportion to the level of goods or services produced, such as materials and direct labor.

Units Sold

The total quantity of products that a company sells during a specific period.

Production Costs

The total expenses incurred in the process of manufacturing or producing goods, including raw materials, labor, and overhead costs.