Use the Aggregate Expenditures Model and Assume an Economy Is

question 112

Multiple Choice

Use the aggregate expenditures model and assume an economy is in equilibrium at $6 trillion which is $500 billion below full-employment GDP. If the marginal propensity to consume (MPC) is 0.75, full-employment GDP can be reached if government spending:

• A)increases by $75 billion.
• B)increases by $125 billion.
• C)increases by $500 billion.
• D)is held constant.

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Definitions:

Attachment Patterns

The systematic ways in which individuals emotionally bond and connect with others, developed in early childhood.

Single-Parent Families

Households led by one parent rather than the traditional two-parent setup, often resulting from divorce, separation, death, or single-person adoption.

Testable Hypothesis

A hypothesis that can be supported or refuted through experimentation or observation.

Scientific Investigation

A systematic process for acquiring new knowledge about the natural world based on observable, empirical evidence.