Assume Autonomous Net Taxes Fall by $300, and the MPC

question 78

Multiple Choice

Assume autonomous net taxes fall by $300, and the MPC equals 2/3.Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed.What is the value of the spending multiplier?  

• A) 0 
• B) 1 
• C) 3 
• D) 10

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Definitions:

Crossover Point

The point at which two different processes, costs, or investments meet in terms of efficiency, cost, or profitability.

Variable Costs

Expenses that vary directly with the volume of output or operations.

Full-Service Restaurant

A dining establishment that offers a wide range of services including table service, food, and drinks, as opposed to limited-service or fast-food restaurants.

Affluence

The state of having a great deal of wealth or material prosperity, often associated with a high standard of living and consumption.