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:

Motivational Mechanism

The process or system by which motivation is generated or regulated within individuals or groups.

Agency Law

The area of law that deals with the relationship between agents and principals, including the duties and rights that arise from such relationships.

State Laws

Statutes and regulations enacted by state legislatures that govern matters not exclusively reserved to the federal government.

Federal Laws

Laws established by the national government of a country that apply throughout the country and override local and state laws.