The Equilibrium Level of Real GDP Is $1,000, the Target

question 100

Multiple Choice

The equilibrium level of real GDP is $1,000, the target level of real GDP is $1,250, and the marginal propensity to consume (MPC) is 0.60. The target can be reached if government spending is:

• A) increased by $60 billion.
• B) increased by $100 billion.
• C) increased by $250 billion.
• D) held constant.

Analyze different scenarios to determine the elasticity type and its impact on quantity demanded.

Distinguish between substitutes and complements based on cross-price elasticity of demand values.

Interpret the effects of income changes on the demand for goods using income elasticity.

Evaluate the significance of elasticity in real-life scenarios, such as market strategy and consumer choice.

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Definitions:

Costs Of Production

The aggregate cost of producing a product or delivering a service, encompassing the price of raw materials, workforce, and indirect expenses.

Industry

A group of firms producing similar products or services that serve the same market.

Profits

The financial gain achieved when the revenue from business activities exceeds the costs and expenses involved in operating.

Market Economy

An economic system where the prices of goods and services are determined in a free price system, set by supply and demand.