If the Marginal Propensity to Consume (MPC) Is 0

question 5

Multiple Choice

If the marginal propensity to consume (MPC) is 0.75, a $50 decrease in government spending, other things being equal, would cause equilibrium real GDP to:

• A) increase by $50.
• B) decrease by $50.
• C) increase by $200.
• D) decrease by $200.

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Definitions:

Maximum Amount

The highest possible quantity or value that can be achieved or allowed, often within a specific context or regulation.

Deficit Balance

A financial situation where liabilities exceed assets or expenses exceed income, leading to a negative balance.

Capital Account

The capital account in financial accounting represents where adjustments in assets and liabilities are recorded, correlating to transactions involving investments or loans.

Liquidating Partnership

A process where a partnership ends its operations, sells off its assets, and pays its liabilities, distributing the remaining assets to the partners based on their share in the partnership.