If Investment Spending Decreases by $500 Billion and If MPC

question 97

Multiple Choice

If investment spending decreases by $500 billion and if MPC = 0.6,

• A) equilibrium GDP will rise by $1,250 billion
• B) equilibrium GDP will fall by $500 billion
• C) equilibrium GDP will fall by $1,250 billion
• D) equilibrium GDP will rise by $500 billion
• E) nothing will happen in the short run

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Definitions:

Foreign Competition

Refers to the competition that domestic companies face from companies located in other countries.

Financial Opportunities

Prospects or chances for individuals or organizations to gain financial benefits or profits, often through investments, business ventures, or other economic activities.

Distribution of Power

The way in which authority, control, and decision-making capabilities are allocated and exercised across different levels within an organization or society.

Economic Growth

The increase in the production of goods and services in an economy over a period of time, often measured by the rise in the Gross Domestic Product (GDP).