Assume That the MPC Is 0

question 38

Multiple Choice

Assume that the MPC is 0.8. Assume that the total crowding-out effect is $20 billion. How will an increase in government purchases of $9 billion shift the AD curve?

• A) It will shift the AD curve right by $25 billion.
• B) It will shift the AD curve left by $25 billion.
• C) It will shift the AD curve right by $20 billion.
• D) It will shift the AD curve left by $20 billion

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Definitions:

Passive

Describes a state or quality of being inactive or accepting situations without resistance or response.

Irritable

A state of being easily annoyed or angered, often resulting from stress or discomfort.

Easy Temperamental Style

Refers to an individual's innate emotional and behavioral disposition that is determined to be naturally positive and relaxed.

Frustration

A feeling of irritation or annoyance due to the inability to achieve a goal or satisfy a need.