If You Spend $100 and the MPC Is 0

question 74

Multiple Choice

If you spend $100 and the MPC is 0.9, how much spending will this $100 generate in the economy?

• A) $1,000
• B) $500
• C) $250
• D) $100

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Definitions:

Production

The process of combining various material inputs and immaterial inputs (plans, know-how) in order to make something for consumption (the output).

Supply Curves

Graphical representations showing the relationship between the price of a good and the quantity of that good that suppliers are willing and able to sell, holding other factors constant.

Long Run

A period in economics in which all factors of production and costs are variable, allowing all inputs to be adjusted.

Perfectly Inelastic

A situation where demand does not change at all in response to changes in price.