Assume the MPC Is 0

question 221

Multiple Choice

Assume the MPC is 0.75. Assuming only the multiplier effect matters, a decrease in government purchases of $100 billion will shift the aggregate demand curve to the

• A)left by $200 billion.
• B)left by $400 billion.
• C)right by $800 billion.
• D)None of the above is correct.

Distinguish between nominal and real GDP and understand the significance of each.

Comprehend the importance of changes in inventory levels and their impact on GDP.

Recognize the impact of government purchases, investments, and exports and imports on GDP computation.

Understand how to calculate GDP with given macroeconomic variables.

---

Definitions:

Average Total Cost

The sum of all production expenses (both fixed and variable) divided by the overall output.

Total Variable Cost

The cumulative expenses that change in proportion to the level of goods or services produced.

Output

refers to the quantity of goods or services produced by a firm, industry, or economy within a specific period.