If Government Decreases Its Purchases by $20 Billion and the MPC

question 151

True/False

If government decreases its purchases by $20 billion and the MPC is 0.8, equilibrium GDP will decrease by $100 billion.

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Definitions:

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since it was placed in service.

Liability Accounts

Accounts on the balance sheet that represent obligations of the company, including loans, accounts payable, mortgages, and accrued expenses.

Expired Insurance

The portion of an insurance premium that has been used up during the term of the policy and is therefore no longer in effect.

Assets

Resources owned by a company, providing future economic benefits, including cash, inventory, and property.