In a Depressed Economy with a MPC of 0

question 89

Multiple Choice

In a depressed economy with a MPC of 0.75, what effect will a $100 increase in government spending have on equilibrium GDP?

• A) It will reduce it by $250.
• B) It will raise it by $250.
• C) It will raise it by $400.
• D) It will raise it by $750.

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Definitions:

Inventory Returns Estimated

An estimate of the value or volume of goods that are expected to be returned by customers over a specific period.

Sales Refund Payable

Obligations to return funds received from customers due to returns or refunds of products or services.

Sales Returns

Transactions in which customers return previously purchased merchandise for a refund, store credit, or exchange.

Merchandise Inventory

Goods that a company owns and intends to sell as part of its regular business operations, usually in the retail sector.