If the MPC Is 3/5 Then the Multiplier Is

question 33

Multiple Choice

If the MPC is 3/5 then the multiplier is

• A)4, so a $100 increase in government spending increases aggregate demand by $400.
• B)1.5, so a $100 increase in government spending increases output by $150.
• C)2.5, so a $100 increase in government spending increases aggregate demand by $250.
• D)1.67, so a $100 increase in government spending increases output by $166.67.

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Definitions:

Reported Gain

The profit reported on financial statements, reflecting the difference between the sale price of an asset and its book value.

Equity Method

An accounting technique used to record investments in other companies, recognizing income proportional to ownership.

Consolidation

The process of combining the financial statements of separate but related entities into a single set of financial statements for the group.

Consolidated Net Income

The total net income of a parent company and its subsidiaries, after adjusting for intercompany transactions, reported as a single figure.