Use the Aggregate Expenditures Model and Assume an Economy Is

question 57

Multiple Choice

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

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

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Definitions:

Debt Ratios

Financial metrics that measure the proportion of a company's debt to its assets or equity, indicating the financial leverage and risk.

CCA Recapture

Capital Cost Allowance Recapture, a tax mechanism in Canada that occurs when the sale price of a depreciable asset exceeds its undepreciated capital cost or book value.

Terminal Losses

Losses realized at the end of an investment period or the life of an asset, often associated with the disposal of fixed assets or investment vehicles.

Lessors

Individuals or entities that lease an asset to another party, known as the lessee, in exchange for periodic payments.