Assume That the MPC Is 0

question 319

Multiple Choice

Assume that the MPC is 0.8. If government spending increases by $200, equilibrium output ________; and if taxes increase by $200, equilibrium output ________.

• A) increases by $1,000; decreases by $800
• B) increases by $800; decreases by $600
• C) increases by $1,000; decreases by $1,000
• D) increases by $1,600; decreases by $1,200

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Definitions:

Classical

Often referring to classical conditioning, a learning process that occurs through associations between an environmental stimulus and a naturally occurring stimulus.

Family Resemblance

The concept of how members of a category share certain characteristics, though there may be no single characteristic common to all.

Mental Representation

Internal, mental symbols, concepts or ideas that stand in for objects, actions, or conditions in the external world, facilitating cognitive processes.

Concept

A mental representation of a category.