In the Basic Keynesian Model Where the Marginal Propensity to Consume

question 147

Multiple Choice

In the basic Keynesian model where the marginal propensity to consume is 0.5,transfer payments must be ________,to close an expansionary gap resulting from a $1 billion increase in autonomous consumption.

• A) increased by $1 billion
• B) decreased by $1 billion
• C) increased by $2 billion
• D) decreased by $2 billion
• E) increased by $0.5 billion

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Definitions:

Trust Companies

Financial institutions that act as agents for individuals or businesses to manage, invest, and safeguard assets.

Corporate Income Tax

Taxes imposed on the net income of corporations.

Proprietorship

A business owned and operated by a single individual, where there is no legal distinction between the owner and the business entity.

Interest Rates

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.