Suppose That the MPC Is 0

question 7

Multiple Choice

Suppose that the MPC is 0.5 and there is no investment accelerator or crowding-out effects. If government expenditures increase by $200 billion, what happens to aggregate demand?

• A) It shifts right by $200 billion.
• B) It shifts left by $200 billion.
• C) It shifts right by $400 billion.
• D) It shifts left by $400 billion.

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Definitions:

Binder Agreement

A temporary or preliminary agreement that outlines the terms of a more formal agreement to be made later.

Temporary Insurance Coverage

Short-term insurance protection provided to the insured during a specific period or while waiting for permanent insurance to become effective.

Insurance Coverage

The amount and type of protection provided under an insurance policy against financial loss or liability.

Insurance Clauses

Provisions within an insurance policy that outline the rights, duties, and coverages provided to the insured.