Suppose the Marginal Propensity to Consume (MPC)is 0

question 65

Multiple Choice

Suppose the marginal propensity to consume (MPC) is 0.9 and there is a $3,000 increase in planned investment. Given this information, real GDP will increase by

• A)$3,000.
• B)$2,700.
• C)$30,000.
• D)$3,333.

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Definitions:

International Trade

The exchange of goods, services, and capital between countries and territories, influenced by comparative advantages and economies of scale.

Infant-Industry Argument

The economic rationale for protecting new industries with tariffs or other trade barriers until they become competitive internationally.

Tariff

A tax or duty to be paid on a particular class of imports or exports, used by governments to control trade and protect domestic industries.

Import Quota

A specific limit or maximum quantity (or value) of a good permitted to be imported into a country during a given period.