In the Simple Keynesian Model,if the Equilibrium Level of Income

question 5

Multiple Choice

In the simple Keynesian model,if the equilibrium level of income is $300 billion,the MPC is 0.75,and government expenditures increase by 20 billion.What is the new equilibrium level of income?

• A)$320 billion
• B)$380 billion
• C)$220 billion
• D)$520 billion

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Definitions:

Supplies

Materials or items which are used in the operation of a business or needed in the production process.

Services

Economic activities that are intangible, are not stored, and do not result in ownership transfer from the service provider to the service receiver.

Double-Entry

An accounting principle where every transaction is entered twice, as a debit in one account and a credit in another, to keep the accounting equation balanced.

Accounting Equation

The fundamental principle of accounting that represents the relationship between assets, liabilities, and owner's equity: Assets = Liabilities + Owner's Equity.