To Achieve a $500 Billion Increase in AD, If the MPC

question 36

Multiple Choice

To achieve a $500 billion increase in AD, if the MPC is 0.8, what increase in government purchases would be called for?

• A)​$625 billion
• B)​$500 billion
• C)​$400 billion
• D)​$100 billion

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Definitions:

Commercial Paper

An unsecured, short-term debt instrument issued by corporations, typically used for the financing of inventory, accounts receivable, and meeting short-term liabilities.

Treasury Bills

Short-term government securities issued at a discount from the face value and mature in a year or less, representing a secure, low-risk investment option.

September 11

A date marking significant terrorist attacks in the United States in 2001, leading to widespread global economic and political effects.

Price Weighted Stock Index

An index in the stock market where the impact of each company’s stock on the index is directly proportional to its share price.