Assume That the MPC Is 0

question 38

Multiple Choice

Assume that the MPC is 0.8. Assume that the total crowding-out effect is $20 billion. How will an increase in government purchases of $9 billion shift the AD curve?

• A) It will shift the AD curve right by $25 billion.
• B) It will shift the AD curve left by $25 billion.
• C) It will shift the AD curve right by $20 billion.
• D) It will shift the AD curve left by $20 billion

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Definitions:

Administrative Expenses

Costs associated with the general operation of a business, such as office salaries and utilities.

Raw Materials Inventory

The total cost of all the components and materials stored that are to be used in the production of goods.

Indirect Product Cost

Costs associated with production that are not directly attributable to the product, such as maintenance and utilities.

Advertising Campaign

A series of advertisement messages that share a single idea and theme which make up an integrated marketing communication.