If the MPC for an Economy Is 0

question 147

Multiple Choice

If the MPC for an economy is 0.90,a $4 billion increase in taxes will ultimately cause consumption to decrease by

• A)$40 billion.
• B)$36 billion.
• C)$4.4 billion.
• D)$3.6 billion.

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Definitions:

Dollar-Denominated Assets

Financial assets such as bonds, stocks, or bank deposits that are measured in U.S. dollars.

Foreign Investment

Foreign investment involves capital flows from one country to another, granting the investor ownership stakes in foreign companies or assets, aiming for future returns on the investments.

Creditors

Individuals or institutions that lend money or extend credit, expecting to be repaid, usually with interest.

Great Recession

A severe global economic downturn that occurred from late 2007 through mid-2009, marked by significant declines in GDP, high unemployment, and financial instability.