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.

---

Definitions:

Binding Decision

A ruling or outcome from a legal or quasi-legal process that must be adhered to by the parties involved, leaving no discretion to disregard it.

Classic Two-Party Negotiation

A negotiation framing between exactly two parties where each negotiates to settle on terms or reach an agreement, typically used in business and legal scenarios.

Bargaining Zone

The range within which parties are willing to negotiate and find an agreement in negotiations or bargaining scenarios.

Reservation Point

The lowest acceptable value or outcome an individual is willing to accept in a negotiation.