Assume That the MPC Is 0

question 67

Multiple Choice

Assume that the MPC is 0.8. Assuming that only the multiplier effect matters, how will a decrease in government purchases of $15 billion shift the aggregate demand curve?

• A)It will shift the aggregate demand curve left by $12 billion.
• B)It will shift the aggregate demand curve left by $15 billion.
• C)It will shift the aggregate demand curve right by $15 billion.
• D)It will shift the aggregate demand curve left by $75 billion.

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Definitions:

Sensory Adaptation

The method through which sensory detectors decrease their sensitivity to unchanging stimuli over a period.

Absolute Threshold

The minimum intensity of a stimulus that one can perceive, marking the boundary between non-detection and detection of a stimulus.

Weber's Law

A principle in psychology that states the smallest change in a stimulus, such as weight or brightness, that can be detected is a constant proportion of the stimulus level.

Absolute Threshold

The minimum stimulus intensity required to detect a stimulus at least half the time.