Assume That the Marginal Propensity to Consume Is 0

question 158

Multiple Choice

Assume that the marginal propensity to consume is 0.8 and potential output is $800 billion. If GDP is $850 billion:

• A)there is an inflationary gap.
• B)there is a recessionary gap.
• C)the economy is in long-run equilibrium.
• D)taxes should be decreased.

---

Definitions:

Oedipus Complex

A concept in psychoanalytic theory introduced by Sigmund Freud, which posits a child's unconscious sexual desire for the opposite-sex parent and jealousy toward the same-sex parent.

Freud

Sigmund Freud was an Austrian neurologist who founded the discipline of psychoanalysis, a method for treating psychopathology through dialogue between a patient and a psychoanalyst.

Personality Formed

The process by which an individual's distinct personality traits develop, often influenced by genetic, environmental, and social factors.

Projection

A defense mechanism where individuals attribute their own unacceptable thoughts, feelings, or motives to another person.