If Investment Spending Decreases by $500 Billion and If MPC

question 97

Multiple Choice

If investment spending decreases by $500 billion and if MPC = 0.6,

• A) equilibrium GDP will rise by $1,250 billion
• B) equilibrium GDP will fall by $500 billion
• C) equilibrium GDP will fall by $1,250 billion
• D) equilibrium GDP will rise by $500 billion
• E) nothing will happen in the short run

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Definitions:

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Commercial Loss

Financial damage suffered by a business, often through reduced sales, increased costs, or direct loss of assets.

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