Multiple Choice
(Advanced analysis) Assume that the MPC is 0.8 in an economy that has an aggregate supply curve with a slope of 1.Also, suppose that the price level is flexible downward.A decrease in investment spending of $10 billion will shift the aggregate demand curve leftward by
A) $50 billion and decrease real GDP by $50 billion.
B) $50 billion and decrease real GDP by $25 billion.
C) $10 billion and decrease real GDP by $10 billion.
D) $10 billion and decrease real GDP by $25 billion.
Correct Answer:
Verified
Correct Answer:
Verified
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