If Net Exports Fall $40 Billion and the MPC Is

question 295

Multiple Choice

If net exports fall $40 billion and the MPC is 8/11 and there is a multiplier effect, but no crowding out and no investment accelerator, then

• A)aggregate demand falls by 3 x $40 billion.
• B)aggregate demand falls by 11/3 x $40 billion.
• C)aggregate demand falls by 11/8 x $40 billion.
• D)None of the above is correct.

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Definitions:

Financial Statement Forecasts

Projections or estimates of a company's future financial performance, including income statements, balance sheets, and cash flows.

Depreciation Expense

An accounting method that allocates the cost of a tangible asset over its useful life.

Collateral

Assets pledged by a borrower to secure a loan or other credit, and subject to seizure by the lender if the loan is unpaid.

Bondholder

An investor or owner of bonds issued by a corporation or government entity, entitled to receive interest payments and the return of principal.