Assume That the MPC Is 0

question 115

Multiple Choice

Assume that the MPC is 0.9. If government purchases increase by $100, equilibrium output ________; and if taxes increase by $100, equilibrium output ________.

• A) increases by $1,000; decreases by $1,000
• B) increases by $900; decreases by $1,000
• C) increases by $1,000; decreases by $900
• D) increases by $400; decreases by $400

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Definitions:

Manipulated

Being controlled or influenced in an unfair or dishonest way.

High Levels

Refers to a state or condition of exceeding average or normal ranges, which can apply to various contexts such as performance, intensity, or degree.

Decision Making

The action or process of identifying a strategy to resolve problems.

Risk-taking Propensity

The tendency of an individual or organization to engage in behaviors that have the potential for both significant reward and significant risk.