Use the aggregate expenditures model and assume the marginal propensity to consume (MPC) is 0.80. An increase in government spending of $1 billion would result in an increase in GDP of:
A. $0.8 billion.
B. $1.0 billion.
C. $5.0 billion.
D. $8.0 billion.
Answer: C
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a. 0% b. 25% c. 20% d. 40%
Borrowing from foreign banks by U.S. firms represents a capital inflow
a. True b. False Indicate whether the statement is true or false
Assume that a bank has $2,000 in total reserves and $10,000 in checkable deposits and the required reserve ratio on checkable deposits is 20%. This bank's excess reserves equal
A. $500. B. $250. C. $750. D. zero.
If workers and employers agree to a three-year wage contract under the expectation of 5 percent inflation, and inflation turns out to be 3 percent, then:
A. workers lose and employers gain. B. workers lose and employers lose. C. workers gain and employers gain. D. workers gain and employers lose.