If You Were Told the MPC Was = 0

question 53

Multiple Choice

If you were told the MPC was = 0.75 and the government engaged in a spending increase of $400B, then the change in GDP would be:

• A) $400B.
• B) $1600B.
• C) $300B
• D) $1200B

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Definitions:

Short-Run Total Cost

The total of all costs incurred in the production process when some factors of production are fixed.

Production Function

An equation, table, or graph that shows the maximum output of goods and services that can be produced with varying inputs under certain technological constraints.

Labor

The human effort, both physical and mental, used in the production process.

Average Cost

The cost per unit, determined by dividing the total production costs by the quantity of units produced.