In a Keynesian Open Economy, Suppose That the MPC =

question 13

Multiple Choice

In a Keynesian open economy, suppose that the MPC = 0.8, the MPM = 0.10, and t = 0.25. If it is desired to increase national income by 125 through an increase in private investment, by how much will private investment have to increase in order to generate the 125 increase in income?

• A) 25
• B) 31.25
• C) 50
• D) 62.5

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Definitions:

Sum

The result of adding two or more numbers or quantities together.

Product

The result of multiplying two or more quantities together.

Gigabytes

A unit of digital information storage equal to 1,024 megabytes or roughly one billion bytes.

Megabytes

A unit of data measurement equal to 1024 kilobytes or 1,048,576 bytes, often used to quantify digital information.