If the MPC Is 0

question 43

Multiple Choice

If the MPC is 0.80 and there are no crowding-out or accelerator effects,then an initial increase in aggregate demand of $100 billion will eventually shift the aggregate demand curve to the right by

• A) $80 billion.
• B) $125 billion.
• C) $500 billion.
• D) $800 billion.

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Definitions:

Diminishing Returns

A principle stating that as one factor of production increases while others remain fixed, there will eventually be a decrease in the incremental output gained.

Normal Rate

A standard or usual level of financial return on investment or interest on loans.

Supply

The total amount of a product or service that is available to consumers at a given price over a specific period.

Profits

The financial gain obtained when the revenues generated from business activities exceed the expenses, costs, and taxes involved in sustaining the activity.