Calculate the total change in spending because of an initial $100 increase in aggregate demand, given that the MPC = 0.60.
A. $100 decrease.
B. $60 increase.
C. $250 increase.
D. $100 increase.
Answer: C
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An interest rate ceiling is likely to cause
a. inflation b. optimal allocation of investment c. increased opportunities for poor people to get loans d. higher savings e. all of the above
The introduction of sweep accounts
A) was an open market purchase. B) was a failure. C) had no effect. D) caused a reduction in the demand for money.
If government policy makers were worried about the inflationary potential of the economy, which of the following would not be a correct fiscal policy change?
a. Increase consumption taxes b. Increase government purchases of goods and services. c. Decrease government purchases. d. None of the above.
Fiscal policy influences the levels of income and employment
A. through regulatory controls designed to stimulate business investment. B. through antitrust enforcement. C. through presidential and congressional "jawboning" (speeches and related verbal exhortations) designed to promote economic growth. D. through changes in taxes, transfers, and expenditures.