Suppose That the MPC Is 0

question 294

Multiple Choice

Suppose that the MPC is 0.60; there is no investment accelerator; and there are no crowding-out effects. If government expenditures increase by $25 billion, then aggregate demand

• A)shifts rightward by $62.5 billion.
• B)shifts rightward by $50.0 billion.
• C)shifts rightward by $32.5 billion.
• D)None of the above is correct.

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Definitions:

Internal Rate

Also known as the internal rate of return (IRR), it is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.