Assume That the MPC Is 0

question 36

Multiple Choice

Assume that the MPC is 0.75 and that the price level is "sticky". If the Federal Reserve increases the money supply and investment spending increases by $8 billion, then aggregate demand is likely to:

• A) Increase by $6 billion
• B) Increase by $8 billion
• C) Increase by $32 billion
• D) Decrease by $8 billion

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Definitions:

Cognitive Concept

An idea or mental construct that represents understanding, thoughts, or awareness regarding objects, events, or relationships.

Object Reversibility

Refers to the cognitive recognition that relationships or operations can be returned to their original state from a changed state, underscoring a development in logical thinking.

Identical Balls

Objects that are exactly the same in every aspect, such as size, weight, texture, and material.

Concrete Operational Stage

A stage in Piaget's theory of cognitive development (approximately age 7-12) where children gain the ability to think logically about concrete events.