If Government Increases Its Purchases by $20 Billion and the MPC

question 13

Multiple Choice

If government increases its purchases by $20 billion and the MPC is 0.9,what will the resulting increase in the consumption component of AD be?

• A)$2 billion
• B)$18 billion
• C)$180 billion
• D)$200 billion

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Definitions:

Per-Unit Tax

A tax that is levied on a product based on a fixed amount per unit, affecting the supply curve by elevating production costs.

Tax Burden

The measure of the total amount of taxes imposed by a government on individuals, businesses, and other entities, often expressed as a percentage of GDP.

Product Structure

An organizational framework that groups together all the elements involved in producing a specific product or product line.

Organizational Structures

The framework within which organizational tasks are divided, resources are allocated, and departments are coordinated.