Suppose the Marginal Propensity to Consume (MPC) Is 0

question 62

Multiple Choice

Suppose the marginal propensity to consume (MPC) is 0.8. To achieve a $500 billion increase in aggregate demand, other things constant, government purchases in an economy should increase by:

• A)$625 billion.
• B)$500 billion.
• C)$400 billion
• D)$100 billion
• E)$200 billion

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Definitions:

Curvilinear Relationships

A relationship in a statistical model where the change in the outcome variable does not follow a straight line, but rather a curve, as the value of the predictor variable changes.

Linear Relationships

Relationships between two variables that can be depicted with a straight line on a graph, indicating a constant rate of change.

Structural Equation Modeling

Statistical techniques that are used to evaluate a proposed set of relationships among variables.

Theoretical Model

A formal representation of theory, often using diagrams or mathematical expressions to describe relationships between variables.