Exhibit 15-7 Aggregate Demand and Supply Model

question 115

Multiple Choice

Exhibit 15-7 Aggregate demand and supply model

-Beginning at equilibrium E₁ in Exhibit 15-7,assume the marginal propensity to consume (MPC) is 0.90 and the government increases taxes by $100 billion.The aggregate demand curve will shift to the:

• A) left by $1,000 billion.
• B) right by $1,000 billion.
• C) right by $900 billion.
• D) left by $900 billion.

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Definitions:

Mental Processes

Internal, covert activities of our minds, such as thinking, problem-solving, and remembering.

Frontal Lobes

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The total amount of muscle tissue in a person's body.

Cell Phone

A portable telephone device that uses wireless communication.