If the MPC = 3/4, an Increase in Government Purchases

question 62

Multiple Choice

If the MPC = 3/4, an increase in government purchases of $40 billion will ultimately lead to:

• A)​a $160 billion increase in aggregate demand.
• B)​a $40 billion increase in aggregate demand.
• C)​a $30 billion increase in aggregate demand.
• D)​a $30 billion decrease in aggregate demand.

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Definitions:

Vouchers Payable

Represents liabilities or amounts owed by a company to its suppliers or vendors, documented through vouchers.

Periodic Method

A method of inventory accounting where updates to inventory levels and cost of goods sold are made at the end of an accounting period.

Gross Method

An accounting method where purchases are recorded at their full purchase price without deducting any cash discounts.

Periodic Inventory Method

An accounting practice where inventory levels and cost of goods sold are calculated at predetermined intervals, such as monthly or annually.