Suppose Government Finds It Can Increase the Equilibrium Real GDP

question 87

Multiple Choice

Suppose government finds it can increase the equilibrium real GDP $45 billion by increasing government purchases by $18 billion.On the basis of this information,we can say that the:

• A) MPS in this economy is .4.
• B) MPC in this economy is .4.
• C) multiplier does not apply in this economy.
• D) multiplier is 3.

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Definitions:

Corporation

A legal entity that can own property and enter into contracts for the benefit of its shareholders.

Social constitution

The way in which a society is organized, including its social structures, norms, and institutions, and how they interact to shape the behavior and attitudes of its members.

Political economy

A branch of social science that studies the relationships between individuals and society and between markets and the state, using methods from both economics and political science.

Market capitalism

An economic system where decisions and investments are determined by the market, with goods and services produced and exchanged according to demand and supply.