If MPC = 0

question 31

Multiple Choice

If MPC = 0.75 (and there are no income taxes but only lump-sum taxes) when T decreases by 100, then the IS curve for any given interest rate shifts to the right by:

• A)100.
• B)200.
• C)300.
• D)400.

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Definitions:

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive, typically viewed as a measure of producer welfare.

Consumer Surplus

The divergence between the sum consumers are prepared to pay for a product or service and the sum that is actually paid.

Maximum Price

A price ceiling set by a government or regulatory body, above which a particular good or service cannot be sold, often to protect consumers.

Equilibrium Prices

The price at which the quantity of a good supplied is equal to the quantity demanded, leading to market balance.