To Eliminate an AD Shortfall of $100 Billion When the Economy

question 34

Multiple Choice

To eliminate an AD shortfall of $100 billion when the economy has an MPC of 0.80,the government should increase transfer payments by

• A)$25 billion.
• B)$100 billion.
• C)$80 billion.
• D)$20 billion.

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Definitions:

Equilibrium

A balance between market demand and supply, resulting in steady prices.

Factor's Price

Refers to the price of inputs used in the production of goods or services, such as labor, raw materials, and capital.

Total Cost

The complete expenditure incurred by a firm in the production of goods or services, including both fixed and variable costs.

Product Demand

The desire and willingness of consumers to purchase a specific quantity of a good or service at a given price.