(Advanced Analysis) Assume That the MPS Is 0

question 161

Multiple Choice

(Advanced analysis) Assume that the MPS is 0.33 in an economy that has an aggregate supply curve with a slope of 1.An increase in investment spending of $10 billion will shift the aggregate demand curve rightward by

• A)$30 billion and increase real GDP by $15 billion.
• B)$30 billion and increase real GDP by $30 billion.
• C)$10 billion and increase real GDP by $30 billion.
• D)$10 billion and increase real GDP by $10 billion.

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Definitions:

Short-Run Aggregate Supply

Short-Run Aggregate Supply represents the total production of goods and services in an economy at a specific time, considering variable production costs and fixed capital.

Unemployment Rate

The percentage of people in the labor force who are unemployed and are actively trying to find a job.

Expected Price Level

The anticipated average price of goods and services in an economy at a future point in time, affecting consumer and business planning.

Structural Unemployment

Unemployment arising from fundamental changes in the economy that displace workers, such as technological advancements or shifts in demand.