An Increase in Government Spending by $100 Would, If the MPC

question 197

Multiple Choice

An increase in government spending by $100 would, if the MPC = 0.90, result in an increase in real GDP by:

• A) $1,000.
• B) $9,000.
• C) $900.
• D) $190.
• E) inadequate information is given.

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Definitions:

Bank Overdrafts

An extension of credit from a lending institution when an account reaches zero, allowing the account holder to continue withdrawing money up to a certain limit.

Indirect Method

A way of reporting cash flows from operating activities by starting with net income and adjusting for non-cash transactions.

Direct Method

A way of presenting a cash flow statement where actual cash flows from operating activities are disclosed directly.

Operating Activities

Transactions and events related to the principal revenue-producing activities of an entity, reflected in its cash inflows and outflows.