Assume the Marginal Propensity to Consume (MPC) Is 0

question 85

Multiple Choice

Assume the marginal propensity to consume (MPC) is 0.8 and the government cuts taxes by $250 billion. The aggregate demand curve will shift to the:

• A) right by $1000 billion.
• B) right by $750 billion.
• C) left by $1000 billion.
• D) left by $750 billion.

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Definitions:

Book Value

The net value of an asset calculated as total assets minus total liabilities, shown on the balance sheet.

Units-Of-Production Method

A depreciation method that allocates the cost of an asset over its useful life based on the amount of production or use during the period.

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life, reflecting wear and tear, obsolescence, or other declines in value.

Fixed Asset Turnover Ratio

A financial metric used to evaluate how effectively a company uses its fixed assets to generate sales.