Deck 11: Fiscal Policy

Question 1

Suppose the MPC equals 0.75 and G increases by $100.By what amount will real GDP demanded increase?  

A) by $25 
B) by $50 
C) by $200 
D) by $400

Answer 1

 by $400

Question 2

Which of the following assumptions is usually made about government purchases?  

A) Government purchases vary directly with the interest rate. 
B) Government purchases are autonomous. 
C) Government purchases vary directly with the level of income. 
D) Government purchases vary inversely with the level of income.

Answer 2

 Government purchases are autonomous. 

Question 3

Which of the following is NOT a variable that can be manipulated to affect fiscal policy?  

A) personal income taxes 
B) government expenditures on goods and services 
C) the interest rate 
D) corporate income taxes

Answer 3

 the interest rate 

Question 4

$$\begin{array} { c c c c } \hline \begin{array} { c } \text { Real } \\\text { GDP } \\( \$ )\end{array} & \begin{array} { c } \text { Consumption } \\( \$ )\end{array} & \begin{array} { c } \text { Planned } \\\text { investment } \\( \$ )\end{array} & \begin{array} { c } \text { Government } \\\text { purchases } \\( \$ )\end{array} \\\hline 1,800 & 1,540 & 100 & 200 \\1,900 & 1,620 & 100 & 200 \\2,000 & 1,700 & 100 & 200 \\2,100 & 1,780 & 100 & 200 \\2,200 & 1,860 & 100 & 200 \\2,300 & 1,940 & 100 & 200 \\\hline\end{array}$$

-Refer to the table in the exhibit.Suppose government purchases increased to $100.What would be the effect on equilibrium real GDP demanded?  

A) It would decrease by $100. 
B) It would decrease by $300. 
C) It would increase by $100. 
D) It would increase by $300.

Question 5

Which of the following is NOT a tool of fiscal policy?  

A) taxes 
B) transfer payments 
C) interest rates 
D) government purchases of goods and services

Question 6

Government expenditures and taxes are assumed to be autonomous.What does this mean?  

A) Government expenditures and taxes do NOT depend up on the level of GDP. 
B) Government expenditures and taxes may be changed only through direct action by Parliament. 
C) Government expenditures and taxes change only when the price level changes. 
D) Government expenditures and taxes are autonomous at low levels of GDP but NOT at higher levels of GDP.

Question 7

Assume that initially G is $100 and equilibrium real GDP demanded is $1,000.Suppose the multiplier is 4 and G increases to $200.By what amount will real GDP demanded increase?  

A) by $100 
B) by $1,000 
C) by $1,400 
D) by $2,000

Question 8

$$\begin{array} { c c c c } \hline \begin{array} { c } \text { Real } \\\text { GDP } \\( \$ )\end{array} & \begin{array} { c } \text { Consumption } \\( \$ )\end{array} & \begin{array} { c } \text { Planned } \\\text { investment } \\( \$ )\end{array} & \begin{array} { c } \text { Government } \\\text { purchases } \\( \$ )\end{array} \\\hline 1,800 & 1,540 & 100 & 200 \\1,900 & 1,620 & 100 & 200 \\2,000 & 1,700 & 100 & 200 \\2,100 & 1,780 & 100 & 200 \\2,200 & 1,860 & 100 & 200 \\2,300 & 1,940 & 100 & 200 \\\hline\end{array}$$

-Refer to the table in the exhibit.Suppose government purchases increased to $300.By what amount would equilibrium real GDP demanded increase?  

A) by $300 
B) by $500 
C) by $1,200 
D) by $1,500

Question 9

Suppose equilibrium real GDP demanded rises from $4 trillion to $6 trillion when government purchases increase by $1 trillion.What is the marginal propensity to consume?  

A) 0.8 
B) 0.5 
C) 0.4 
D) 0.2

Question 10

Which of the following is a component of aggregate demand?  

A) transfer payments from government 
B) taxation by government 
C) purchases by government 
D) borrowing by government

Question 11

What tools are used in fiscal policy?  

A) increases in the money supply 
B) nationalization of key industries 
C) only government purchases 
D) government purchases, transfer payments, and taxes

Question 12

Other things constant, what causes a decrease in real GDP demanded?  

A) an increase in government purchases 
B) an increase in transfer payments 
C) a decrease in government purchases 
D) a decrease in net taxes

Question 13

What does fiscal policy focus on?  

A) on manipulating aggregate demand, in order to smooth out business fluctuations 
B) on manipulating aggregate supply, in order to smooth out business fluctuations 
C) on manipulating both aggregate supply and aggregate demand, in order to smooth out business fluctuations 
D) on manipulating aggregate demand, in order to stimulate the economy, and on manipulating aggregate supply, in order to contract it

Question 14

What is the purpose of fiscal policy?  

A) Fiscal policy uses the federal government's powers over spending and taxation to affect employment, the price level, and GDP. 
B) Fiscal policy uses the federal government's powers over the money supply and interest rates to affect employment, the price level, and GDP. 
C) Fiscal policy uses the federal government's powers over spending and taxation to affect employment and prices, but NOT to affect the level of GDP. 
D) Fiscal policy uses the federal government's powers over spending and taxation to affect employment and the level of GDP, but NOT to affect the price level.

Question 15

What is fiscal policy concerned with?  

A) only government spending and taxation 
B) only government spending and money 
C) only money and taxation 
D) government spending, taxation, and money

Question 16

Which of the following is an example of a discretionary fiscal policy?  

A) when there is a change in the money supply 
B) when interest rates increase or decrease 
C) when a plan works automatically without public announcement or plan 
D) when there is an intentional change in taxation or government spending

Question 17

Which of the following is NOT a tool of fiscal policy?  

A) money supply 
B) government purchases 
C) taxes 
D) unemployment benefits

Question 18

Which of the following illustrates the use of discretionary fiscal policy?  

A) The Bank of Canada reduces its bank rate. 
B) Government appropriates $500 million to help the needy, and the appropriation is financed by a tax on wealth. 
C) Income tax receipts are smaller because of a decline in real GDP during a recession. 
D) Parliament passes a bill authorizing $2 billion in additional spending when it receives news of a deepening recession.

Question 19

Why are government purchases assumed to be autonomous?  

A) because they are independent of the price level 
B) because they are independent of the level of real GDP 
C) because they are independent of consumption 
D) because they are independent of investment

Question 20

What is the distinction between discretionary fiscal policy and the use of automatic stabilizers?  

A) Only discretionary fiscal policy can stimulate the economy. 
B) Only automatic stabilizers can stimulate the economy. 
C) Discretionary fiscal policy, once adopted, is built into the structure of the economy, while automatic stabilizers are NOT. 
D) Automatic stabilizers, once adopted, are built into the structure of the economy, while discretionary fiscal policy is NOT.

Question 21

Exhibit 11-2

Refer to the graph in the exhibit.Consider an economy characterized by the aggregate expenditure line.Suppose autonomous net taxes decreased by $100.What would the equilibrium real GDP be equal to?  

A) $400 
B) $500 
C) $600 
D) $700

Question 22

Exhibit 11-2

Refer to the graph in the exhibit.Consider an economy characterized by the aggregate expenditure line.Suppose autonomous government spending decreased by $100.What would the equilibrium real GDP be equal to?  

A) $400 
B) $500 
C) $600 
D) $700

Question 23

Suppose the net taxes on the quantity of real GDP demanded changes.How would this change be expressed?  

A) as a shift in the consumption function times the marginal propensity to consume 
B) as a shift in the consumption function times the marginal propensity to save 
C) as a shift in the consumption function times the autonomous net tax multiplier 
D) as a shift in the consumption function times the simple spending multiplier

Question 24

Exhibit 11-2

Refer to the graph in the exhibit.Consider an economy characterized by the aggregate expenditure line.How would a $100 decrease in autonomous government spending affect real GDP?  

A) It would decrease real GDP by $200. 
B) It would decrease real GDP by $100. 
C) It would increase real GDP by $200. 
D) It would increase real GDP by $100.

Question 25

Suppose the MPC is 0.75, and net taxes decrease by $100 billion.By what amount will the equilibrium level of real GDP increase?  

A) by $75 billion 
B) by $100 billion 
C) by $300 billion 
D) by $400 billion

Question 26

When government purchases increase, what does the spending multiplier illustrate?  

A) the amount of movement along the aggregate demand curve 
B) the amount of movement along the aggregate supply curve 
C) the extent of the rightward shift of the aggregate demand curve at a given price level 
D) the extent of the rightward shift of the aggregate supply curve at a given price level

Question 27

Which of the following describes the effects of a decrease in net taxes?  

A) A decrease in net taxes raises aggregate expenditure by raising disposable income, thereby increasing consumption. 
B) A decrease in net taxes raises aggregate expenditure by raising disposable income, thereby decreasing consumption. 
C) A decrease in net taxes lowers aggregate expenditure by lowering disposable income, thereby decreasing consumption. 
D) It lowers aggregate expenditure by lowering disposable income, thereby increasing consumption.

Question 28

Suppose the MPC equals 0.6 and government purchases increase by $2 trillion.How will equilibrium real GDP demanded change?  

A) It will increase by $5 trillion. 
B) It will increase by $2 trillion 
C) It will decrease by $5 trillion. 
D) It will decrease by $2 trillion.

Question 29

Suppose the government increases its purchases by $100 and the multiplier is 4.How does equilibrium real GDP demanded change?  

A) It increases by $25. 
B) It decreases by $25. 
C) It increases by $400. 
D) It decreases by $400.

Question 30

Exhibit 11-2

Refer to the graph in the exhibit.Consider an economy characterized by the aggregate expenditure.Suppose government spending is independent of the level of real GDP.What is the government spending multiplier?  

A) 0 
B) 1 
C) 2 
D) 3

Question 31

$$\begin{array} { c c c c } \hline \begin{array} { c } \text { Real } \\\text { GDP } \\( \$ )\end{array} & \begin{array} { c } \text { Consumption } \\( \$ )\end{array} & \begin{array} { c } \text { Planned } \\\text { investment } \\( \$ )\end{array} & \begin{array} { c } \text { Government } \\\text { purchases } \\( \$ )\end{array} \\\hline 1,800 & 1,540 & 100 & 200 \\1,900 & 1,620 & 100 & 200 \\2,000 & 1,700 & 100 & 200 \\2,100 & 1,780 & 100 & 200 \\2,200 & 1,860 & 100 & 200 \\2,300 & 1,940 & 100 & 200 \\\hline\end{array}$$

-Refer to the table in the exhibit.What is the government spending multiplier?  

A) 2 
B) 3 
C) 4 
D) 5

Question 32

Exhibit 11-2

Refer to the graph in the exhibit.Consider an economy characterized by the aggregate expenditure line.How would a $100 increase in autonomous government spending affect real GDP?  

A) It would decrease real GDP by $100. 
B) It would decrease real GDP by $200. 
C) It would increase real GDP by $100. 
D) It would increase real GDP by $200.

Question 33

Exhibit 11-2

Refer to the graph in the exhibit.Consider an economy characterized by the aggregate expenditure line.How would a $100 increase in autonomous net taxes affect real GDP?  

A) It would decrease real GDP by $200. 
B) It would decrease real GDP by $100. 
C) It would increase real GDP by $200. 
D) It would increase real GDP by $100.

Question 34

Exhibit 11-2

Refer to the graph in the exhibit.Consider an economy characterized by the aggregate expenditure line.Suppose autonomous government spending increased by $100.What would the equilibrium real GDP be equal to?  

A) $500 
B) $600 
C) $700 
D) $800

Question 35

How does government affect the consumption component of planned aggregate expenditures?  

A) through net taxes, which change disposable income 
B) by purchasing goods and services, which increase consumption 
C) by using subsidies to encourage firms to invest 
D) by using net taxes to encourage firms to invest

Question 36

Exhibit 11-2

Refer to the graph in the exhibit.Consider an economy characterized by the aggregate expenditure line.How would a $100 decrease in autonomous net taxes affect real GDP?  

A) It would decrease real GDP by $100. 
B) It would decrease real GDP by $200. 
C) It would increase real GDP by $100. 
D) It would increase real GDP by $200.

Question 37

Exhibit 11-2

Refer to the graph in the exhibit.Consider an economy characterized by the aggregate expenditure line.Suppose net taxes are independent of the level of real GDP.What is the tax multiplier?  

A) 0 
B) 1 
C) 2 
D) 3

Question 38

How do transfer payments and taxes affect aggregate spending?  

A) Transfer payments and taxes affect aggregate spending directly, just as consumption does. 
B) Transfer payments and taxes affect aggregate spending indirectly, by first changing disposable income and thereby changing consumption. 
C) Transfer payments and taxes do NOT affect aggregate spending. 
D) Transfer payments and taxes affect aggregate spending indirectly, by first changing national income and thereby changing consumption.

Question 39

Exhibit 11-2

Refer to the graph in the exhibit.Consider an economy characterized by the aggregate expenditure line.Suppose autonomous net taxes increased by $100.What would the equilibrium real GDP be equal to?  

A) $400 
B) $500 
C) $600 
D) $700

Question 40

Suppose a research lab fired a chemist, and then an environmental protection group hired the chemist at the same salary.What would be the net effect of these events on aggregate demand?  

A) The aggregate demand would shift rightward. 
B) The aggregate demand would shift leftward. 
C) The aggregate demand would become steeper. 
D) The aggregate demand would remain the same.

Question 41

Suppose a $100 autonomous net tax is introduced in an economy with an MPC equal to 0.8.How will this affect equilibrium real GDP demanded at each level of real GDP?  

A) The equilibrium real GDP demanded will increase by $100. 
B) The equilibrium real GDP demanded will increase by more than $100. 
C) The equilibrium real GDP demanded will decrease by less than $100. 
D) The equilibrium real GDP demanded will decrease by more than $100.

Question 42

Suppose transfer payments and autonomous taxes both increase by identical amounts.How will equilibrium income be affected?  

A) Equilibrium income will increase by an amount equal to the tax increases. 
B) Equilibrium income will increase by more than the amount of the tax increases. 
C) Equilibrium income will increase by less than the amount of the tax increases. 
D) The equilibrium income will remain the same.

Question 43

How does a change in autonomous net taxes affect the equilibrium quantity of GDP demanded?  

A) in the same way as a change in autonomous government purchases would affect equilibrium quantity of GDP demanded 
B) in the same way as a change in autonomous planned investment would affect equilibrium quantity of GDP demanded 
C) in the same way as a change in autonomous net exports would affect equilibrium quantity of GDP demanded 
D) only indirectly, by first changing the level of disposable income

Question 44

How is aggregate expenditure affected when net taxes are cut?  

A) Government purchases fall. 
B) Government purchases rise. 
C) Consumption falls. 
D) Consumption rises.

Question 45

Suppose autonomous taxes and transfer payments each increase by $50 billion.If the MPC equals 0.75, by what amount does equilibrium real GDP demanded change?  

A) by -$200 billion 
B) by -$50 billion 
C) by $0 
D) by $50 billion

Question 46

Which of the following will NOT increase when net taxes decrease?  

A) saving 
B) disposable income 
C) consumption 
D) government expenditure

Question 47

Suppose autonomous net taxes increase by $200 billion and the MPC equals 0.75.By what amount will equilibrium income decrease?  

A) by $150 billion 
B) by $200 billion 
C) by $267 billion 
D) by $600 billion

Question 48

How does a decrease in autonomous net taxes affect GDP?  

A) It increases GDP as much as an equal decrease in government purchases. 
B) It increases GDP less than an equal increase in government purchases. 
C) It decreases GDP more than an equal decrease in government purchases. 
D) It changes GDP in an unpredictable manner.

Question 49

What is the formula for the simple tax multiplier?  

A) 1/MPC 
B) MPC/(1 - MPC) 
C) 1/(1 - MPC) 
D) -MPC/(1 - MPC)

Question 50

What is the formula for the multiplier that results from a change in autonomous net taxes?  

A) -MPC/(1 - MPC) 
B) MPC/(1 - MPC) 
C) 1/(1 - MPC) 
D) -1/(1 - MPC)

Question 51

Suppose the MPC equals 0.8.What is the simple tax multiplier?  

A) 5 
B) 4 
C) 0.8 
D) -4

Question 52

Suppose autonomous net taxes decline by $40 billion and the MPC equals 0.75.What effect will this have on equilibrium real GDP demanded?  

A) It will decline by $120 billion. 
B) It will increase by $120 billion. 
C) It will decline by $160 billion. 
D) It will increase by $160 billion.

Question 53

Suppose a $100 autonomous net tax is introduced in an economy with an MPC equal to 0.7.How will this affect consumption at each level of real GDP?  

A) Consumption will increase by $100. 
B) Consumption will decrease by $100. 
C) Consumption will increase by $70. 
D) Consumption will decrease by $70.

Question 54

Suppose the government decreases net autonomous taxes by $100 billion and the MPC equals 0.75.How will this affect equilibrium real GDP demanded?  

A) It will increase by $300 billion. 
B) It will decrease by $300 billion. 
C) It will increase by $400 billion. 
D) It will decrease by $400 billion.

Question 55

Which of the following explains the effects of an increase in net taxes?  

A) An increase in net taxes raises aggregate expenditure by raising disposable income, thereby increasing consumption. 
B) An increase in net taxes raises aggregate expenditure by raising disposable income, thereby decreasing consumption. 
C) An increase in net taxes lowers aggregate expenditure by lowering disposable income, thereby increasing consumption. 
D) An increase in net taxes lowers aggregate expenditure by lowering disposable income, thereby decreasing consumption.

Question 56

How will the introduction of an autonomous net tax affect consumption?  

A) through a change in government spending 
B) through a change in disposable income 
C) through its effect on investment 
D) through its effect on net exports

Question 57

Suppose autonomous net taxes equal $1 trillion at all levels of real GDP.What can be safely assumed about net taxes?  

A) They are autonomous. 
B) They are equal to transfer payments. 
C) They depend on the level of real GDP. 
D) They equal zero when GDP equals zero.

Question 58

Suppose the marginal propensity to consume (MPC) is equal to 0.8.What is the simple tax multiplier?  

A) -4 
B) -3 
C) 1 
D) 5

Question 59

Which of the following is a definitive characteristic of an autonomous tax?  

A) it must be independent of investment 
B) it must be independent of consumption 
C) it must be independent of government spending 
D) it must be independent of real GDP

Question 60

Which of the following describes the effects of an autonomous net taxes decrease?  

A) Disposable income increases, consumption decreases, and saving decreases. 
B) Disposable income increases, consumption increases, and saving increases. 
C) Disposable income decreases, consumption decreases, and saving decreases. 
D) Disposable income decreases, consumption increases, and saving increases.

Question 61

Exhibit 11-3

Refer to the graph in the exhibit.Consider an economy characterized by the aggregate demand curve AD and the short-run aggregate supply curve SRAS50.What is the size of the recessionary gap?  

A) $500 
B) $400 
C) $300 
D) $200

Question 62

Assume autonomous net taxes rise by $500, and the marginal propensity to consume equals 0.75.Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed.As a result, how will equilibrium real GDP demanded change?  

A) It will rise by $500. 
B) It will fall by $500. 
C) It will rise by $1,500. 
D) It will fall by $1,500.

Question 63

Which of the following might be considered the most expansionary set of fiscal policies?  

A) increase government purchases, increase taxes, and decrease transfer payments 
B) decrease government purchases, increase taxes, and decrease transfer payments 
C) increase government purchases, decrease taxes, and increase transfer payments 
D) increase government purchases, increase taxes, and increase transfer payments

Question 64

Exhibit 11-4

Refer to the graph in the exhibit.What will happen in the economy if government purchases increase by the amount necessary to achieve full employment?  

A) The AD curve will shift to the right, the SRAS curve will shift to the left, and long-run equilibrium will be achieved. 
B) The AD curve will shift to the right, the price level will increase, and long-run equilibrium will be achieved. 
C) The AD curve will shift to the right, the price level will increase, and the expansionary gap will worsen. 
D) The AD curve will shift to the left, the price level will increase, and the contractionary gap will worsen.

Question 65

Assume autonomous net taxes rise by $400, and the marginal propensity to consume equals 3/4.Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed.As a result, how will consumption initially change?  

A) It will fall by $400. 
B) It will rise by $400. 
C) It will fall by $300. 
D) It will rise by $300.

Question 66

Exhibit 11-3

Refer to the graph in the exhibit.Consider an economy characterized by the aggregate demand curve AD and the short-run aggregate supply curve SRAS50.What is the short-run equilibrium level of real GDP and the price level?  

A) $300 and 20 
B) $500 and 20 
C) $300 and 40 
D) $500 and 50

Question 67

Assume autonomous net taxes fall by $300, and the MPC equals 2/3.Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed.As a result, how will saving initially change?  

A) It will fall by $100. 
B) It will rise by $100. 
C) It will fall by $300. 
D) It will rise by $300

Question 68

Suppose the government wants to cause equilibrium income to rise by $100 through a change in autonomous net taxes and the MPC is 0.8.By what amount should the government decrease autonomous net taxes?  

A) by $20 
B) by $25 
C) by $100 
D) by $300

Question 69

Assume autonomous net taxes rise by $400, and the marginal propensity to consume equals 3/4.Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed.As a result, how will saving initially change?  

A) It will fall by $400. 
B) It will fall by $100. 
C) It will rise by $100 
D) It will rise by $300.

Question 70

Assume autonomous net taxes fall by $300, and the MPC equals 2/3.Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed.What is the value of the spending multiplier?  

A) 0 
B) 1 
C) 3 
D) 10

Question 71

Which of the following fiscal policies will help close a recessionary gap?  

A) The government increases taxes by the size of the gap. 
B) The government decreases taxes by the size of the gap. 
C) The government increases taxes by more than the size of the gap. 
D) The government decreases taxes by less than the size of the gap.

Question 72

Assume autonomous net taxes fall by $300, and the MPC equals 2/3.Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed.As a result, how will consumption initially change?  

A) It will rise by $300. 
B) It will fall by $300. 
C) It will rise by $200. 
D) It will fall by $200.

Question 73

Assume autonomous net taxes fall by $300, and the MPC equals 2/3.Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed.As a result, what will be the change in equilibrium real GDP demanded?  

A) It will fall by $300. 
B) It will rise by $300. 
C) It will fall by $600. 
D) It will rise by $600.

Question 74

Which of the following fiscal policies will help close a recessionary gap?  

A) The government increases government spending by the size of the gap. 
B) The government decreases government spending by the size of the gap. 
C) The government increases government spending by more than the size of the gap. 
D) The government increases government spending by less than the size of the gap.

Question 75

Assume autonomous net taxes fall by $300, and the MPC equals 2/3.Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed.How will disposable income initially change?  

A) It will rise by $900. 
B) It will rise by $300. 
C) It will rise by $200. 
D) It will fall by $300.

Question 76

Suppose the short-run aggregate supply curve has a positive slope.And suppose an effective fiscal policy to correct for an expansionary gap effect is implemented.What variable will be affected?
 

A) only the price level, which will fall 
B) only real GDP, which will fall 
C) only the price level, which will rise 
D) the price level and real GDP, both of which will fall

Question 77

Exhibit 11-4

Refer to the graph in the exhibit.Suppose the government wants the economy to be at full employment.What should the government do to achieve this goal?  

A) decrease taxes 
B) decrease transfer payments 
C) decrease government purchases 
D) wait for the SRAS curve to shift to the left

Question 78

Assume autonomous net taxes rise by $500, and the marginal propensity to consume equals 3/4.Net exports, planned investment, taxes, and government purchases are autonomous and remain fixed.How will disposable income initially change?  

A) It will rise by $500. 
B) It will fall by $375. 
C) It will fall by $500. 
D) It will fall by $2,000.

Question 79

Exhibit 11-4

Refer to the graph in the exhibit.Which one of the following sets of policies would move the economy to full employment?  

A) increase government purchases, increase taxes, and decrease transfer payments 
B) decrease government purchases, increase taxes, and decrease transfer payments 
C) increase government purchases, decrease taxes, and increase transfer payments 
D) increase government purchases, increase in taxes, and increase transfer payments

Question 80

Exhibit 11-3

Refer to the graph in the exhibit.If the government wants to increase equilibrium by $100 billion through a change in autonomous net taxes, autonomous net taxes might decrease.If the decrease occurs, what is the likely amount?  

A) $100 billion 
B) $100 billion × (1 - MPC)/MPC 
C) $100 billion × MPC/(1 - MPC) 
D) $100 billion × MPC/(MPC - 1)