Use the Aggregate Expenditures Model and Assume the Marginal Propensity

question 117

Multiple Choice

Use the aggregate expenditures model and assume the marginal propensity to consume (MPC) is 0.80. An increase in government spending of $1 billion would result in an increase in GDP of:

• A)$0.
• B)$0.8 billion.
• C)$1.0 billion.
• D)$5.0 billion.
• E)$8.0 billion.

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Definitions:

Media Coverage

The reporting, broadcasting, or publishing of news and information by various media outlets, such as television, radio, newspapers, and the internet.

Misinformation Effect

The phenomenon where a person's recall of episodic memories becomes less accurate due to post-event information.

Fundamental Attribution Error

It is the tendency to overemphasize personality-based explanations for others' behaviors while underestimating the role of situational factors.

Availability Heuristic

A mental shortcut that relies on immediate examples that come to a person's mind when evaluating a specific topic, concept, method or decision.