If Equilibrium Real GDP Demanded Rises from $4 Trillion to $6

question 1

Multiple Choice

If equilibrium real GDP demanded rises from $4 trillion to $6 trillion when government purchases increase by $1 trillion,how large is the marginal propensity to consume?

• A)0.8
• B)0.4
• C)0.5
• D)0.2
• E)2

---

Definitions:

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and adjusted over time for the investing company's share of the investee's profit or loss.

Long-Term Investment

Assets that a company intends to hold for more than one year, including stocks, bonds, real estate, and other securities.

Acquisition Method

An accounting approach used for consolidating the financial statements of a parent company and its subsidiaries.