Suppose That Investment Decreases by $15 Billion

question 59

Multiple Choice

Suppose that investment decreases by $15 billion. If the multiplier is 2.5, the aggregate demand curve

• A)shifts leftward by a horizontal distance of $37.5 billion.
• B)shifts leftward by a horizontal distance greater than $37.5 billion.
• C)shifts leftward by a horizontal distance less than $37.5 billion.
• D)shifts upward by a vertical distance of $37.5 billion.
• E)is not affected.

---

Definitions:

Marginal Revenue

The revenue increase from the sale of an additional unit of a good or service.

Marginal Cost

The additional cost incurred by producing one more unit of a product.

Raise Price

An action taken by a seller to increase the selling price of a product or service, often in response to higher costs or in an attempt to increase profits.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, representing the excess that remains after a firm has paid all costs.