Assume That the MPC Is 0

question 96

Multiple Choice

Assume that the MPC is 0.8. Assume that there is a multiplier effect and that the total crowding-out effect is $8 billion. How will an increase in government purchases of $10 billion shift aggregate demand?

• A) It will shift aggregate demand left by $2 billion.
• B) It will shift aggregate demand left by $42 billion.
• C) It will shift aggregate demand right by $2 billion.
• D) It will shift aggregate demand right by $42 billion.

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Definitions:

Male Condoms

A barrier form of contraception worn over the penis during sexual activity to prevent pregnancy and reduce the risk of sexually transmitted infections.

Symptothermal

A method of natural family planning that combines the observation of symptoms and body temperature to track fertility.

Basal Body Temperature

The lowest body temperature attained during rest, often used to monitor ovulation and fertility.

Cervical Mucus

The fluid produced by the cervix, which changes in consistency and volume throughout the menstrual cycle, playing a role in fertility.