If the MPC Equals 0

question 131

Multiple Choice

If the MPC equals 0.80,a $200 billion tax decrease will increase consumption in the first round by

• A)$40 billion.
• B)$160 billion.
• C)$200 billion.
• D)$100 billion.

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Definitions:

Long-Run Aggregate-Supply

The total quantity of goods and services that producers in an economy are willing and able to supply at a full employment level, without any changes in the price level over the long term.

Short Run Aggregate Supply

The total supply of goods and services that businesses in an economy plan on selling during a short time period, assuming that the prices of resources do not change.

Price Level

A mean value of present prices for all goods and services in the economy, indicating the level of inflation or deflation.

Quantity of Output

The total amount of a particular good or service that is produced by a firm or economy.