If, in an economy, a $200 billion increase in consumption spending creates $200 billion of new income in the first round of the multiplier process and $150 billion in the second round, the multiplier and the marginal propensity to consume will be, respectively:
a. 4.00 and 0.75
b. 2.50 and 0.40
c. 3.33 and 0.70
d. 5.00 and 0.80
Answer: a. 4.00 and 0.75
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A) the economy will move up along the long-run aggregate supply curve. B) the long-run aggregate supply curve will shift to the right. C) the long-run aggregate supply curve will shift to the left. D) the economy will move down along the long-run aggregate supply curve.
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a. True b. False Indicate whether the statement is true or false