Suppose the marginal propensity to consume (MPC) is 0.8 and there is a $1,000 increase in autonomous consumption. Given this information, real GDP will increase by
A. $2,500.
B. $1,600.
C. $2,000.
D. $5,000.
Answer: D
You might also like to view...
Explain the concept of diminishing returns
What will be an ideal response?
Briefly describe how imports and taxes affect the size of the expenditure multiplier
What will be an ideal response?
Under a _____, the assets of two firms that operate in the same market are put under a single ownership
a. vertical merger b. horizontal merger c. vertical acquisition d. horizontal acquisition
When the Fed unexpectedly reduces the money supply, it will cause a decrease in aggregate demand because
a. real interest rates will rise, lowering business investment and consumer spending. b. the dollar will depreciate on the foreign exchange market, leading to an increase in net exports. c. lower interest rates will cause the value of assets (for example, stocks) to rise. d. the national debt will increase, causing consumers to reduce their spending.