Suppose That the Level of GDP Increased by $100 Billion

question 59

Multiple Choice

Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume is 0.5. Aggregate expenditures must have increased by

• A) $100 billion.
• B) $50 billion.
• C) $500 billion.
• D) $5 billion.

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Definitions:

Share Premium

The amount received by a company over and above the face value of its shares when it issues them.

Capital in Excess

Funds that exceed the par value of issued stock, often referred to as additional paid-in capital or share premium.

U.S.GAAP

United States Generally Accepted Accounting Principles, a collection of rules and guidelines designed to improve and standardize accounting practices.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was acquired and put into use.