Assume the MPC Is 0

question 325

Multiple Choice

Assume the MPC is 0.625. Assuming only the multiplier effect matters, a decrease in government purchases of $10 billion will shift the aggregate demand curve to the

• A)left by about $13.3 billion.
• B)left by about $26.7 billion.
• C)right by about $36.7 billion.
• D)None of the above is correct.

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Definitions:

Uncompensated Benefits

Benefits that occur from an economic transaction that affect individuals not directly involved in the transaction, not compensated by the market.

Waterway Pollution

Contamination of rivers, lakes, oceans, and other bodies of water, adversely affecting aquatic ecosystems, human health, and the economy.

Open Access

A policy whereby resources are made available to all, without restrictions, such as in academic publishing where research is freely accessible.

Economic Efficiency

The optimal allocation of resources within an economy, where goods and services are produced and distributed in a manner that maximizes societal welfare.