Assume That the MPC Is 0

question 157

Multiple Choice

Assume that the MPC is 0.75. Full employment is considered to be at a GDP level of $500 billion. The GDP is $600 billion. What should the government do to achieve full employment?

• A) increase spending by $25 billion
• B) increase spending by $10 billion
• C) reduce spending by $25 billion
• D) reduce spending by $100 billion

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Definitions:

Post-closing Trial Balance

A summary listing of all company accounts that remain after closing entries have been made, serving as a check that debits equal credits.

Owner's Capital Account

An equity account on the balance sheet representing the total amount of investment made by the owner(s) in the company, including profits retained in the business.

Balance Sheet Accounts

These are the financial accounts that appear on the balance sheet, including assets, liabilities, and equity accounts, representing the financial position of a company at a specific point in time.

Permanent Accounts

Financial accounts whose balances are carried over into the next accounting period, including assets, liabilities, and equity accounts.