If the MPS Is 0

question 66

Multiple Choice

If the MPS is 0.25 and the economy has a recessionary expenditure gap of $5 billion, then equilibrium GDP is

• A)$5 billion below the full-employment GDP.
• B)$5 billion above the full-employment GDP.
• C)$20 billion below the full-employment GDP.
• D)$20 billion above the full-employment GDP.

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Definitions:

Economic Models

Simplified representations of complex economic processes, used to predict future economic behaviors and outcomes.

Entrepreneurship

The activity of setting up a business, taking on financial risks in the hope of profit.

Implicit Costs

The opportunity costs of resources already owned by the firm and used in business, for which no cash payment is made.

Price-Discriminating

A pricing strategy where a seller charges different prices for the same product or service to different customers, based on factors like buyer's age, location, or purchase history.