If the MPC in an Economy Is 0

question 36

Multiple Choice

If the MPC in an economy is 0.75, government could shift the aggregate demand curve leftward by $60 billion by

• A) reducing government expenditures by $12 billion.
• B) reducing government expenditures by $60 billion.
• C) increasing taxes by $15 billion.
• D) increasing taxes by $20 billion.

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Definitions:

Economic Profit

The gap between an enterprise's total earnings and its combined explicit and implicit outlays.

Farming

The practice of cultivating the land or raising stock, such as crops and livestock, typically for food production.

Diminishing Marginal Product

Diminishing marginal product is an economic principle stating that adding an additional factor of production results in smaller increases in output after a certain point.

Variable Cost

A cost that varies with the level of output or production activity.