Suppose Aggregate Output Is Demand Determined

question 68

Multiple Choice

Suppose aggregate output is demand determined.If the marginal propensity to spend is 0.5,and the MPC is 0.7,a $1 billion reduction in government purchases will cause equilibrium national income to ________ by ________.

• A)decrease; $3.33 billion
• B)decrease; $2.00 billion
• C)decrease; $1.50 billion
• D)increase; $2.00 billion
• E)increase; $3.33 billion

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Definitions:

Capacities To Enjoy

The inherent potential or capability individuals possess to derive satisfaction or pleasure from various activities or consumptions.

Baby Boomers

The demographic cohort following World War II, typically defined as individuals born from 1946 to 1964.

Income Inequality

The unequal distribution of income within a population, often leading to social and economic disparities.

Labor Force

The total number of people who are employed and unemployed but seeking work, representing the available labor supply in an economy.