If the MPC = 0

question 42

Multiple Choice

If the MPC = 0.75,a decrease in personal taxes from $100 billion to $80 billion will increase real GDP by

• A) $20 billion.
• B) $40 billion.
• C) $60 billion.
• D) $80 billion.

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Definitions:

Cash Flow

The total amount of money being transferred into and out of a business, especially considered important for maintaining liquidity.

Cost Of Capital

The total cost of funds used for financing a business, including debt and equity.

NPV

Net Present Value, a calculation used to determine the value of a project or investment by discounting future cash flows to the present.

Cash Flow

Total funds inflow and outflow within a business and its effect on liquid assets.