If the MPC Is 2/3 Then the Multiplier Is

question 379

Multiple Choice

If the MPC is 2/3 then the multiplier is

• A)3/2, so a $100 increase in government spending increases aggregate demand by $150.
• B)3/2, so a $100 increase in government spending increases aggregate supply by $150.
• C)3, so a $100 increase in government spending increases aggregate demand by $300.
• D)3, so a $100 increase in government spending increases aggregate supply by $300.

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Definitions:

Compounded Monthly

A method of calculating interest where the interest is added to the principal amount each month, with each subsequent calculation including the previously accumulated interest.

Interest

The cost associated with the right to borrow funds, often represented as a percentage rate per year.

Compounded Semi-Annually

An approach to calculating interest where the interest is added to the principal twice a year.

Loan

The lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc.