Use the Aggregate Expenditures Model and Assume an Economy Is

question 133

Multiple Choice

Use the aggregate expenditures model and assume an economy is in equilibrium at $5 trillion which is $250 billion below full-employment GDP. If the marginal propensity to consume (MPC) is 0.60, full-employment GDP can be reached if government spending:

• A)increases by $60 billion.
• B)increases by $100 billion.
• C)increases by $250 billion.
• D)is held constant.

---

Definitions:

Interest Revenue

Income earned from lending money or depositing funds into interest-bearing accounts.

Unrealized Gain

A profit that exists on paper resulting from an investment that has not yet been sold for cash.

Trading Investments

Trading Investments refer to securities bought and held primarily for selling them in the short term to profit from price fluctuations.

Other Revenue

Revenue from sources other than the primary operating activity of a business.