Equilibrium Real GDP Is $400 Billion, the MPC = 0

question 352

Multiple Choice

Equilibrium real GDP is $400 billion, the MPC = 0.9, and there are no income taxes or imports. Investment increases $40 billion. If the price level is constant, after the increase in investment, equilibrium real GDP will be

• A) $440 billion.
• B) $360 billion.
• C) $600 billion.
• D) $800 billion.

---

Definitions:

Depreciation

The gradual reduction of the recorded cost of a fixed asset over its useful life.

Net Income

Net income is the total profit of a company after all expenses, including taxes and costs, have been subtracted from revenues.

Indirect Method

The indirect method is a way of calculating cash flows from operating activities for the cash flow statement by starting with net income and adjusting for changes in balance sheet accounts.

Liquidity

The simplicity of turning an asset into cash without impacting its market value.