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:

Correlation Coefficient

A numerical measure that quantifies the degree to which two variables are related, ranging from -1 (perfect negative correlation) to +1 (perfect positive correlation).

One-tailed Hypothesis

A hypothesis test that considers either a decrease or an increase in a specific direction, focusing on one end of the probability distribution.

Valid Hypothesis

A hypothesis that is well-founded, testable, and grounded in existing scientific evidence or observations.

Two-tailed Hypothesis

A statistical test hypothesis that considers both directions of effect, allowing for testing differences in either direction.