If the MPC Is 0

question 62

Multiple Choice

If the MPC is 0.8, and the government spends an additional $100b, the overall effect on GDP will be:

• A) $400b.
• B) $500b.
• C) $120b.
• D) $180b.

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Definitions:

Present Value

The contemporary valuation of future monetary sums or cash flow streams, determined by an established rate of profit.

Compounded Annually

Compounded annually is an interest calculation method where the interest earned in one year is added to the principal, and the total becomes the basis for calculating the interest in the following year.

Present Value

The modern assessment of a future money total or cash flow sequence, applying a distinct rate of return.

Compounded Quarterly

The process whereby interest is calculated and added to the principal sum every quarter, leading to compound growth.