If the MPC Were to Increase from 0

question 12

Multiple Choice

If the MPC were to increase from 0.75 to 0.8, then the spending multiplier would:

• A) increase from 4 to 5.
• B) decrease from 5 to 4.
• C) increase from 0.2 to 0.25.
• D) decrease from 1.25 to 1.2.

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Definitions:

Natural Log

The logarithm to the base e, where e is an irrational constant approximately equal to 2.71828, often used in mathematics, physics, and engineering.

Risk Averter

An individual who prefers outcomes that are certain over those with any level of risk, usually willing to accept lower returns to avoid uncertainty.

Expected Value

A calculated average outcome of a random variable, considering all possible outcomes and their probabilities.

Natural Log

A logarithm to the base e (where e is approximately 2.71828), used extensively in mathematical, economic, and scientific applications.