Assume the Economy Is in Recession and Real GDP Is

question 172

Multiple Choice

Assume the economy is in recession and real GDP is below full employment. The marginal propensity to consume (MPC) is 0.75, and the government follows Keynesian economics by using expansionary fiscal policy to increase aggregate demand (total spending) . If an increase of $1,000 billion aggregate demand can restore full employment, the government should:

• A) increase spending by $250 billion.
• B) decrease spending by $750 billion.
• C) increase spending by $1,000 billion.
• D) increase spending by $750 billion.

---

Definitions:

State Agency

An organization established by a state government to carry out specific functions, such as regulating industries or providing services.

Intellectual Property

Property that results from intellectual, creative processes. Copyrights, patents, and trademarks are examples of intellectual property.

Trademark

A distinctive mark, motto, device, or emblem that a manufacturer stamps, prints, or otherwise affixes to the goods it produces so that they can be identified on the market and their origins made known. Once a trademark is established (under common law or through registration), the owner is entitled to its exclusive use.

Patent

A government grant that gives an inventor the exclusive right or privilege to make, use, or sell an invention for a limited time period.