Suppose That MPC = 0

question 103

Multiple Choice

Suppose that MPC = 0.8 and MPI = 0. According to the Keynesian multiplier, an increase of $20 million in government purchases will

• A)increase real GDP by $16 million.
• B)decrease real GDP by $16 million.
• C)increase real GDP by $100 million.
• D)decrease real GDP by $100 million.
• E)have no impact on real GDP.

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Definitions:

Capitalism

An economic system characterized by private or corporate ownership of goods and services, where production and consumption are driven by market forces and profit motive.

Economic System

An organized way a society structures its economic activities, such as production, distribution, and consumption of goods and services.

Socialism

A political and economic theory advocating for collective or governmental ownership and management of the means of production and distribution of goods.

Classless Society

A society in which hierarchical divisions based on economic status are absent, aiming for equal access to resources and opportunities for all.