In the Keynesian-Cross Model, If the MPC Equals 0

question 23

Multiple Choice

In the Keynesian-cross model, if the MPC equals 0.75, then a $3 billion decrease in taxes increases planned expenditures by _____ and increases the equilibrium level of income by _____.

• A)$3 billion; $9 billion
• B)$2.25 billion; $6.75 billion
• C)$2.25 billion; $2.25 billion
• D)$3 billion; $3 billion

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Definitions:

Associationism

A theory in psychology that states mental processes operate by the association of one mental state with its successors.

Free Will

denotes the philosophical and psychological concept of individuals' capacity to choose or make decisions independently, free from external constraints or predetermined destinies.

Self-Actualization

The fruition or fulfillment of a person's gifts and capabilities, recognized as an inherent impulse or demand in each individual.

Situational Factor

A variable that influences an individual's behavior or decision-making process, depending on the current situation or environment.