Assume That the MPC Is 0

question 5

Multiple Choice

Assume that the MPC is 0.8. Assuming that only the multiplier effect matters, how will a decrease in government purchases of $150 billion shift the aggregate demand curve?

• A) It will shift the aggregate demand curve left by $120 billion.
• B) It will shift the aggregate demand curve left by $150 billion.
• C) It will shift the aggregate demand curve right by $150 billion.
• D) It will shift the aggregate demand curve left by $750 billion.

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Definitions:

Preconventional Level

The first level in Kohlberg's theory of moral development, where behavior is guided by punishment and self-interest.

Conventional Level

A stage in Kohlberg's theory of moral development where individuals' morality is shaped by societal norms and rules.

Moral Development

The method by which people form appropriate attitudes and actions toward others in society, influenced by societal and cultural standards, regulations, and legislation.

Speeding Ticket

A penalty issued by law enforcement to drivers exceeding the designated speed limit on a roadway, serving as a deterrent against speeding.