If the MPC in an Economy Is 0

question 106

Multiple Choice

If the MPC in an economy is 0.9, a $1 billion increase in government spending will ultimately increase consumption by

• A)$1 billion.
• B)$0.9 billion.
• C)$10 billion.
• D)$9 billion.

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Definitions:

Recession

A significant decline in economic activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income, and wholesale-retail trade.

Increased Unemployment

A rise in the percentage of the labor force that is without work but available for and seeking employment.

Social Security

A government program that provides financial assistance to people with an inadequate or no income, primarily the elderly, disabled, and unemployed.

Long-term Solvency

The ability of an entity, typically a government or business, to meet its long-term financial liabilities and obligations.