Assume the Marginal Propensity to Consume (MPC) Is 0

question 96

Multiple Choice

Assume the marginal propensity to consume (MPC) is 0.80 and the government cuts taxes by $100 billion. The aggregate demand curve will shift to the:

• A) right by $80 billion.
• B) left by $200 billion.
• C) right by $400 billion.
• D) left by $400 billion.
• E) None of the above.

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Definitions:

Fixed Costs

Costs that do not change with the level of output produced, such as rent, salaries, or insurance expenses.

Maximizing Profits

The process of increasing the difference between revenue and costs to achieve the highest possible financial gain.

Economic Profit

The surplus remaining after total costs are subtracted from total revenue, considering both explicit and implicit costs.

Zero Profit

A situation where a firm's total revenues are exactly equal to its total costs, leading to no net gain or loss.