Assume That the MPC Is 0

question 52

Multiple Choice

Assume that the MPC is 0.8. Assume that the total crowding-out effect is $25 billion. How will an increase in government purchases of $9 billion shift the AD curve?

• A)It will shift the AD curve right by $25 billion.
• B)It will shift the AD curve left by $25 billion.
• C)It will shift the AD curve right by $20 billion.
• D)It will shift the AD curve left by $20 billion

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Definitions:

April 30 Year-End

A fiscal year or financial reporting period that concludes on April 30th, often used by companies or organizations for tax or reporting purposes.

Cash-Flow Hedge

A financial strategy used to manage risks associated with the fluctuations in cash flows due to changes in exchange rates, interest rates, or commodity prices.

Cost of the Hedge

The total expenses associated with establishing and maintaining a hedge, including transaction fees and the difference in interest costs.

Forward Contract

A personalized agreement where two parties agree to buy or sell an asset at an agreed-upon price at a later date.