Assume That the Marginal Propensity to Consume in an Economy

question 3

Multiple Choice

Assume that the marginal propensity to consume in an economy is 0.9. If the economy's full-employment real GDP is $500 billion and its equilibrium real GDP is $550 billion, there is an inflationary expenditure gap of:

• A) $5 billion
• B) $50 billion
• C) $100 billion
• D) $500 billion

---

Definitions:

Superficial Curative Effects

Temporary or immediate alleviations of symptoms without addressing the underlying cause.

Antipsychotic Medication

A class of medication primarily used to manage psychosis, including delusions, hallucinations, paranoia, or disordered thought, often seen in schizophrenia and bipolar disorder.

Antianxiety Drugs

Drugs that relieve tension, apprehension, and nervousness.

Antineurotic

Pertaining to substances or methods that are used to prevent or alleviate neurotic disorders.