Assume the Economy Is in Recession and Real GDP Is

question 98

Multiple Choice

Assume the economy is in recession and real GDP is below full employment. The marginal propensity to consume (MPC) is 0.50, and the government follows Keynesian economics by using expansionary fiscal policy to increase aggregate demand (total spending) . If an increase of $1,000 billion aggregate demand can restore full employment, the government should:

• A) increase spending by $250 billion.
• B) decrease spending by $500 billion.
• C) increase spending by $1,000 billion.
• D) increase spending by $500 billion.

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Definitions:

Cash Disbursement Transactions

Financial activities involving the payment of cash from a business to vendors, employees, or other entities.

Authorized

Refers to having official permission or approval, often in the context of legal or financial operations that have been ratified or sanctioned by a governing body or higher authority.

Bank Service Charge

Fees charged by a bank for the maintenance of an account and for providing various banking services.

Note Receivable

A financial asset representing a written promise for the repayment of a loan or debt within a specific timeframe.