The economy is in a recession. The government enacts a policy to increase spending by $2 billion. The MPS is 0.2. What would be the full increase in real GDP from the change in government spending assuming that the aggregate supply curve is horizontal across the range of GDP being considered?
A. $6 billion
B. $8 billion
C. $10 billion
D. $16 billion
C. $10 billion
You might also like to view...
Increasing marginal returns to labor
A) occur when a particularly efficient worker is employed. B) describe the portion of a total product curve where the marginal product is negative. C) mean that two workers produce less than twice the output of one worker. D) are the result of specialization and division of labor in the production process. E) occur only when there are increasing marginal returns to capital.
If perfectly competitive firms are making an economic profit, the economic profit
A) attracts entry by more firms, which lowers the price. B) can be earned both in the short run and the long run. C) is less than the normal profit. D) leads to a decrease in market demand. E) generally leads to firms exiting as they seek higher profit in other markets.
Technological advances: a. Shift only the short run aggregate supply curve to the right
b. Shift only the long run aggregate supply curve to the right. c. Shift both short run and long run aggregate supply curves to the right. d. Do none of the above
A permanent reduction in inflation would
a. permanently reduce shoeleather costs and permanently lower unemployment b. permanently reduce shoeleather costs and temporarily raise unemployment c. temporarily reduce shoeleather costs and temporarily lower unemployment d. temporarily reduce shoeleather costs and temporarily raise unemployment