If the MPC Is 0

question 56

Multiple Choice

If the MPC is 0.8 and net taxes increase by $100 billion,what is the effect on equilibrium output?

• A) There is no effect;equilibrium output is not affected by a change in net taxes.
• B) Equilibrium output will fall by $80 billion.
• C) Equilibrium output will fall by $125 billion.
• D) Equilibrium output will fall by $400 billion.
• E) Equilibrium output will fall by $500 billion.

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Definitions:

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy.

Snow Storm

A severe weather condition characterized by heavy snowfall and strong winds, significantly reducing visibility and potentially disrupting normal activities.

Shovel

A tool typically used for digging, lifting, and moving bulk materials, such as soil, coal, gravel, snow, sand, or ore.

Demand Curve

A graphical representation that shows the relationship between the quantity of a good that consumers are willing to purchase and its price.