If the MPC = 0

question 5

Multiple Choice

If the MPC = 0.6 and government purchases increase by $2 trillion,then equilibrium real GDP demanded

• A)increases by $5 trillion
• B)decreases by the government multiplier
• C)increases by $2 trillion
• D)decreases by $5 trillion
• E)is indeterminate

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Definitions:

401(k) Plan

A retirement savings plan sponsored by an employer, allowing employees to save and invest a portion of their paycheck before taxes are taken out.

Keogh Deduction

A Keogh Deduction refers to tax-deferred pension plan contributions for self-employed individuals and unincorporated businesses, allowing for higher contribution limits compared to other retirement accounts.

Self-Employment Tax

A tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves.

Highly Compensated Employees

Employees who receive compensation from the business exceeding a specific threshold set by the IRS, subject to additional tax regulation.