Assume the Marginal Propensity to Consume (MPC) Is 0

question 189

Multiple Choice

Assume the marginal propensity to consume (MPC) is 0.75 and the economy is in recession with real GDP $1 trillion below full-employment real GDP. To achieve full employment, aggregate demand (AD) must be increased $2 trillion. Following discretionary fiscal policy, government spending should be increased:

• A) $0.25 trillion.
• B) $1 trillion.
• C) $0.5 trillion.
• D) $2 trillion.

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Definitions:

Available Resources

The total assets, financial, human, or material, that are currently accessible for use in achieving goals or completing projects.

Output

Output refers to the goods or services produced by a business, system, or process within a given period.

Role Conflict

A situation in which there are contradictory expectations associated with a single role or multiple roles being performed by an individual.

Divergent Role Expectations

The phenomena where there are conflicting or differing expectations from a single role held by an individual.