If the Marginal Propensity to Consume Is 0

question 215

Multiple Choice

If the marginal propensity to consume is 0.75 and government purchases of goods and services decrease by $30 billion, real GDP will:

• A)increase by $30 billion.
• B)increase by $22.5 billion.
• C)decrease by $30 billion.
• D)decrease by $120 billion.

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Definitions:

National Defense

Government-provided security against foreign aggression, encompassing the military forces and other defense measures.

Common Resource

A resource like air or water that is not owned by anyone, is available for everyone to use, but can become depleted if overused.

Excludable

A characteristic of a good for which it is possible to prevent individuals from enjoying its benefits unless they pay for it.

Artificially Scarce

A situation where a product or resource's availability is limited through artificial means rather than natural scarcity.