Suppose the MPC in the Economy in Figure 10

question 119

Multiple Choice

Suppose the MPC in the economy in Figure 10.2 equals 0.8 and the shift from AD₀ to AD₁ was caused by a decrease in investment of $30 billion.What will the total decrease in aggregate demand be (i.e.,AD₀ to AD₂) as a result of the initial $30 billion decrease?

• A)$37.5 billion.
• B)$130 billion.
• C)$150 billion.
• D)$240 billion.

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Definitions:

Horizontal Analysis

Horizontal analysis is a financial analysis technique that compares historical financial data over a series of periods.

Financial Statement Item

Components or elements present in financial statements, including assets, liabilities, equity, revenues, and expenses.

Percentage Increase

A measure of the degree to which a quantity has grown over a period, expressed as a fraction of the starting value.

Sales

Transactions between a buyer and a seller involving the exchange of goods, services, or property for money.