Suppose the MPC in the Economy in Figure 10

question 110

Multiple Choice

Suppose the MPC in the economy in Figure 10.2 equals 0.8 and the shift from AD₀ to AD₁ was caused by a decrease in investment of $30 billion.What will the total decrease in aggregate demand be (i.e. ,AD₀ to AD₂) as a result of the initial $30 billion decrease?

• A)$37.5 billion.
• B)$130 billion.
• C)$150 billion.
• D)$240 billion.

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Definitions:

Cooperatives

A business organization owned and operated by a group of individuals for their mutual benefit.

S Corporation

A special designation for a corporation that elects to be taxed as a pass-through entity, avoiding double taxation on the corporate income.

Franchisee

The seller of goods or services under a trade name or trademark in a franchise.

Shareholders

Individuals or entities that own shares in a corporation, giving them ownership interests and usually voting rights in the company.