Initially, the Economy Is in Long-Run Equilibrium

question 31

Multiple Choice

Initially, the economy is in long-run equilibrium. Aggregate demand then shifts leftward by $50 billion. The government wants to increase its spending in order to avoid a recession. If the crowding-out effect is always half as strong as the multiplier effect, and if the MPC equals 0.8, then by how much do government purchases have to increase in order to offset the $50 billion leftward shift?

• A)by $5 billion
• B)by $10 billion
• C)by $20 billion
• D)by $50 billion

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Definitions:

ICD-9-CM

The International Classification of Diseases, Ninth Revision, Clinical Modification; a predecessor to ICD-10-CM used for coding and classifying morbidity data from inpatient and outpatient records, primary replaced by ICD-10-CM.

Medicine

The science and practice of the diagnosis, treatment, and prevention of disease, as well as the maintenance of health.

ICD-9-PCS

an abbreviation for the International Classification of Diseases, Ninth Revision, Procedure Coding System; a system used in healthcare to classify procedures and interventions.

Counseling

The professional guidance of individuals by utilizing psychological methods, especially in collecting case history data, using various techniques of the personal interview, and testing interests and aptitudes.