Which of the Following Best Describes the Impact of the MPC

question 97

Multiple Choice

Which of the following best describes the impact of the MPC on AD?

• A)the greater the MPC, the greater the change in government purchases required to achieve a given change in AD
• B)the greater the MPC, the smaller the fraction of an increase in AD due to an increase in government purchases that is consumption
• C)the smaller the MPC, the greater the fraction of an increase in AD due to an increase in government purchases that is consumption
• D)the smaller the MPC, the greater the change in government purchases required to achieve a given change in AD

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Definitions:

Nearest Hundred Thousand

Rounding a number to the closest increment of one hundred thousand.

Social Security Contributions

Payments made to a government scheme that provides retirement, disability, and survivals benefits, funded through taxes on employers and employees.

Benefits

Advantages or payments made to employees, members of insurance policies, or other eligible parties, often in the form of health insurance, retirement plans, or disability coverage.

Tax Shelter

An investment strategy or financial arrangement designed to reduce, defer, or eliminate tax liabilities.