Assume That the MPC Is 0

question 173

Multiple Choice

Assume that the MPC is 0.75 and that the price level is "sticky." If the Federal Reserve increases the money supply and investment spending increases by $8 billion, then aggregate demand is likely to

• A) increase by $6 billion.
• B) increase by $8 billion.
• C) increase by $32 billion.
• D) decrease by $8 billion.

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Definitions:

Cause-and-Effect Relationship

A connection between two events where one (the cause) directly results in the occurrence of the other (the effect).

Research Method

A systematic approach to conducting research that involves collecting data, analyzing information, and presenting findings.

Infer

To deduce or conclude information from evidence and reasoning rather than from explicit statements.

Extraneous Variables

Extraneous variables are those that are not the focus of a study but may influence its outcome, potentially confounding the results if not controlled.