In the Basic Keynesian Model Where the Marginal Propensity to Consume

question 53

Multiple Choice

In the basic Keynesian model where the marginal propensity to consume is 0.5,government purchases must be ________,to close a recessionary gap resulting from a $1 billion decrease 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:

Surplus

A condition where the supply of a product or service surpasses its demand at the existing price.

Monopolist

A Monopolist is a market participant who has exclusive control over the market for a particular good or service, facing no competition.

Perfectly Price Discriminate

A theoretical pricing strategy where a seller charges the maximum possible price that each consumer is willing to pay.

Economic Loss

The financial loss incurred when the cost of producing a good or service exceeds the revenue gained from selling it.