A $100 Billion Decrease in Government Purchases Would

question 116

Multiple Choice

A $100 billion decrease in government purchases would:

• A)​increase AD by $500 billion if MPC = 0.8.
• B)​decrease AD by $300 billion if MPC = 2/3.
• C)​increase AD by $200 billion if MPC = 0.5.
• D)​decrease AD by $40 billion if MPC = 0.4.

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Definitions:

Natural Logarithm

The logarithm to the base e (where e is approximately equal to 2.718281828), often used in mathematics and engineering.

Logistic Regression

A statistical method used for predicting a binary outcome from one or more predictor variables, modeling the probability of occurrence of an event by fitting data to a logistic curve.

Indicator Variable

An indicator variable is a numerical variable used in statistics that adopts a value of 1 if a certain condition is met and 0 if it is not.

Binomial Probability

The probability of obtaining a fixed number of successful outcomes in a fixed number of trials in a binomial experiment.