Assume There Is a Multiplier Effect, Some Crowding Out, and No

question 122

Multiple Choice

Assume there is a multiplier effect, some crowding out, and no accelerator effect. An increase in government expenditures changes aggregate demand more,

• A)the smaller the MPC and the stronger the influence of income on money demand.
• B)the smaller the MPC and the weaker the influence of income on money demand.
• C)the larger the MPC and the stronger the influence of income on money demand.
• D)the larger the MPC and the weaker the influence of income on money demand.

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Definitions:

Trading Partner

A country or organization which engages in international trade with another entity, typically exchanging goods, services, or information.

Comparative Advantage

The ability of a country or firm to produce a particular good or service at a lower opportunity cost than its trading partners, forming the basis of international trade.

Exporting Nation

A country that sells goods and services to other countries, resulting in a net inflow of funds from international trade.