Initially,the Economy Is in Long-Run Equilibrium

question 83

Multiple Choice

Initially,the economy is in long-run equilibrium.Aggregate demand then shifts leftward by $50 billion.The government wants to increase its spending in order to avoid a recession.If the crowding-out effect is always one-third as strong as the multiplier effect,and if the MPC equals 0.6,then by how much do government purchases have to increase in order to offset the $50 billion leftward shift?

• A)by $90 billion
• B)by $60 billion
• C)by $20 billion
• D)by $30 billion

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Definitions:

Identical Environments

Situations or settings that are exactly the same in every aspect, often used in studies to research the effects of genetics versus environment.

Heritability

The proportion of variation in traits among individuals that can be attributed to genetic factors in a population.

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A measure of the clarity or sharpness of vision, typically assessed by the ability to discern letters or numbers at a given distance according to a standardized chart or test.

Hair Length

A physical measurement referring to the extent from the root of the hair on the scalp to its tip.