FIGURE 21-1 Refer to Figure 21-1

question 122

Multiple Choice

FIGURE 21-1 Refer to Figure 21-1.The marginal propensity to consume is equal to

• A)EF/Y₂Y₃.
• B)EF/DF.
• C)ED/CF.
• D)DF/Y₂Y_3.
• E)ED/Y₂Y_3.

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Definitions:

Monetarists

Economists who suggest that fluctuations in the money supply are key in affecting national output in the short term and in determining the price level over an extended term.

Crowding-Out Effect

The phenomenon where increased government spending leads to a reduction in private sector spending and investment due to higher interest rates or other factors.

Government Spending

The total amount of public expenditure by a government, including spending on defense, education, public infrastructure, and welfare programs.

Private Investment

The expenditure on capital goods by private sector firms or individuals in order to generate future income or profits, excluding government spending.