Assume an Economy with an Upward-Sloping Aggregate Supply Curve and an MPC

question 19

Multiple Choice

Assume an economy with an upward-sloping aggregate supply curve and an MPC of 0.80.An increase in investment spending of $50 billion will most likely increase total income by

• A)$200 billion.
• B)$40 billion.
• C)more than $200 billion.
• D)more than $50 billion but less than $250 billion.

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Definitions:

Liquidation

The process of winding up a company’s financial affairs by selling off assets to pay creditors and distributing any remaining assets to shareholders.

Liquidation Expenses

Liquidation Expenses are the costs associated with dissolving a company, including paying off debt, selling assets, and compensating employees and creditors.

Profit and Loss Allocation

Profit and Loss Allocation involves distributing a business’s profits and losses among its various stakeholders or business areas.