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:

Evolutionary Theory

A scientific theory explaining the process by which species undergo genetic changes over generations, leading to diversity of life.

Evolutionary Perspective

A theoretical approach that explains psychological traits as adaptations that have evolved to solve recurrent problems in human ancestral environments.

Triangular Theory

A theory, often related to love, that proposes three components (intimacy, passion, and commitment) are necessary for complete love.

Social Exchange Theory

A theory which maintains that people provide help to someone else when the benefits of helping and the costs of not helping outweigh the potential costs of helping and the benefits of not helping.