Suppose Aggregate Output Is Demand- Determined

question 93

Multiple Choice

Suppose aggregate output is demand- determined. If the business community decreases its planned investment expenditures by $4 billion, causing equilibrium national income to fall by $8 billion, the marginal propensity to spend must be

• A)2/5.
• B)1/3.
• C)1/2.
• D)2/3.
• E)4/5.

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Definitions:

Interest

A charge for borrowed money, generally a percentage of the amount lent.

Inflation Rate

The speed at which overall prices for goods and services increase, leading to a decrease in purchasing power.

Hourly Rate

The amount of money paid for one hour of work.

Equivalent

An item that holds the same worth, purpose, or significance as another within a given context.