Assume That the MPC Is 0

question 38

Multiple Choice

Assume that the MPC is 0.8. Assume that the total crowding-out effect is $20 billion. How will an increase in government purchases of $9 billion shift the AD curve?

• A) It will shift the AD curve right by $25 billion.
• B) It will shift the AD curve left by $25 billion.
• C) It will shift the AD curve right by $20 billion.
• D) It will shift the AD curve left by $20 billion

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Definitions:

Accounting Cycle

The sequence of processes beginning with the recording of a transaction and ending with the posting to the financial statements, completed in each accounting period.

End-of-period Spreadsheet

A financial document used to summarize account balances and adjustments at the end of an accounting period, facilitating the preparation of financial statements.

Accounting Records

Documents and books that capture all the financial transactions of a business or individual.

Closing Process

The procedure in accounting that involves the transfer of all income and expense account balances to the retained earnings to prepare the ledger for the next accounting period.