If the MPS in an Economy Is 0

question 344

Multiple Choice

If the MPS in an economy is 0.4, government could shift the aggregate demand curve leftward by $50 billion by

• A) reducing government expenditures by $125 billion.
• B) reducing government expenditures by $20 billion.
• C) increasing taxes by $50 billion.
• D) increasing taxes by $250 billion.

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Definitions:

Increased Working Capital

Refers to an uptick in the company's current assets minus its current liabilities, indicating improved short-term financial health.

Tax Rate

The percentage at which an individual or corporation is taxed, which can vary depending on income or profit levels.

Net Capital Investment

The total capital investment in a company minus the depreciation on its previous capital investments.

Pre-Tax Salvage Value

The estimated value of an asset at the end of its useful life, before subtracting taxes associated with its disposal.