If the MPS in an Economy Is

question 18

Multiple Choice

If the MPS in an economy is .1, government could shift the aggregate demand curve rightward by $40 billion at each price level by:

• A)increasing government spending by $4 billion.
• B)increasing government spending by $40 billion.
• C)decreasing taxes by $4 billion.
• D)increasing taxes by $4 billion.

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Definitions:

Average Investment

A calculation to assess the average amount of investment over a certain period, often used in evaluating the efficiency or profitability of an investment.

Time Value of Money

The concept that money available at the present time is worth more than the same amount in the future due to its earning capacity.

Net Present Value

A calculation that compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account.

Present Value Factor

A factor used to calculate the present value of a future amount of money or stream of cash flows given a specific rate of return.