If the Marginal Propensity to Consume (MPC)is 0

question 167

Multiple Choice

If the marginal propensity to consume (MPC) is 0.90, a $100 increase in investment spending, other things being equal, will cause an increase in equilibrium real GDP of:

• A)$90.
• B)$100.
• C)$900.
• D)$1,000.

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Definitions:

Years

Units of time measuring the duration or length of events or intervals typically consisting of 365.25 days in the Gregorian calendar.

Future Value

The value of a current asset at a specified date in the future based on an assumed rate of growth over time.

Interest Rate

The levy imposed on a borrower by a lender, shown as a percentage of the borrowed foundational amount, for access to assets.

Cash Flows

The movement of cash into and out of a business, a critical aspect of its financial health, emphasizing liquidity.