Suppose Real GDP Is $800 Billion When the MPC Is

question 79

Multiple Choice

Suppose real GDP is $800 billion when the MPC is 0.80, and people decide to increase their saving by $30 billion. Before this change, the economy was in equilibrium with people intending to save $100 billion and producers intending to invest $100 billion. The new equilibrium level of real GDP is:

• A) $600 billion.
• B) $650 billion.
• C) $680 billion.
• D) $730 billion.

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Definitions:

Stimulant

A compound that increases the activity within the body's physiological or nervous systems.

Nicotine

A stimulant and addictive substance found primarily in tobacco products.

Alcohol

A colorless, volatile liquid that is the active ingredient in drinks such as beer, wine, and spirits, and is also used in sterilization and as a fuel source.

Caffeine

A natural stimulant found in coffee, tea, chocolate, and certain medications that affects the central nervous system, enhancing alertness and reducing tiredness.