Assume the Marginal Propensity to Consume (MPC) Is 0

question 100

Multiple Choice

Assume the marginal propensity to consume (MPC) is 0.80 and the government increases taxes by $100 billion. The aggregate demand curve will shift to the:

• A) left by $80 billion.
• B) right by $200 billion.
• C) right by $400 billion.
• D) left by $400 billion.

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Definitions:

M1

A category of the money supply that includes currency in circulation and checkable deposits in banks.

Bond Prices

The amount of money a bond is bought or sold for in the market, which can fluctuate based on interest rates and the bond's credit rating.

Interest Rates

The cost of borrowing money or the return on investment, expressed as a percentage.

Expansionary Monetary Policy

A form of monetary policy where the central bank increases the money supply and decreases interest rates to stimulate economic growth.