Suppose that government spending increases, shifting up the aggregate expenditure line. GDP increases from GDP 1 to GDP 2, and this amount is $400 billion. If the MPC is 0.75, then what is the distance between N and L or by how much did government spending change?
A) $10 billion
B) $100 billion
C) $200 billion
D) $300 billion
Answer: B) $100 billion
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Robert Lucas Jr. adapted the fooling model to his own way of thinking by replacing that model's assumption of
A) continuous market-clearing. B) imperfect information. C) the natural rate hypothesis. D) the gradual correction of expectational errors.
An increase in a nation's trade deficit occurs when that nation's exports rise and/or its imports fall
a. True b. False Indicate whether the statement is true or false
Economic efficiency is achieved when the price of a unit of a commodity is equal to the marginal cost of producing that unit
a. True b. False Indicate whether the statement is true or false
An increase in government spending will increase the government budget deficit, which tends to increase interest rates, increase saving, crowd out private investment, stimulate capital formation, and slow the level of economic activity
a. True b. False