Suppose That the Level of GDP Increased by $100 Billion

question 92

Multiple Choice

Suppose that the level of GDP increased by $100 billion in a private closed economy where the marginal propensity to consume is .5.Aggregate expenditures must have increased by:

• A) $100 billion.
• B) $50 billion.
• C) $500 billion.
• D) $5 billion.

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Definitions:

Simple Rate of Return

A financial metric used to evaluate the efficiency of an investment or to compare the efficiencies of several investments, calculating net annual profit divided by initial investment cost.

Depreciates Assets

The process of allocating the cost of a tangible asset over its useful life, reflecting wear and tear, deterioration, or obsolescence.

Discount Rate

The interest rate used to discount future cash flows to present value, often used in investment and project valuation.

Net Present Value

The distinction in present monetary value between incoming and outgoing cash over a designated interval.