Assume the MPC Is 0

question 325

Multiple Choice

Assume the MPC is 0.625. Assuming only the multiplier effect matters, a decrease in government purchases of $10 billion will shift the aggregate demand curve to the

• A)left by about $13.3 billion.
• B)left by about $26.7 billion.
• C)right by about $36.7 billion.
• D)None of the above is correct.

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Definitions:

Project's Fixed Assets

Project's fixed assets refer to the long-term tangible assets that are used in the operation of a project and are not expected to be converted into cash in the short term.

Required Return

The minimum profit or yield that investors expect or require from an investment to make it worthwhile.

Net Present Value

An economic measure that determines the disparity between the current value of cash coming in and the current value of cash going out over a specific timeframe.