Assume the Marginal Propensity to Consume (MPC) Is 0

question 189

Multiple Choice

Assume the marginal propensity to consume (MPC) is 0.75 and the economy is in recession with real GDP $1 trillion below full-employment real GDP. To achieve full employment, aggregate demand (AD) must be increased $2 trillion. Following discretionary fiscal policy, government spending should be increased:

• A) $0.25 trillion.
• B) $1 trillion.
• C) $0.5 trillion.
• D) $2 trillion.

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Definitions:

Misinformation

Incorrect or untrue information that is distributed, regardless of whether there is an intent to mislead.

Photo Lineup

A method used in legal processes where witnesses are asked to identify a suspect from a series of photographs.

Memory Error

A discrepancy or mistake in remembering past events, information, or experiences, often due to limitations or biases of the human memory system.

Participants

Individuals who take part in a particular activity or event, especially in contexts like experiments, surveys, or competitions.