Assume That the MPC Is 0

Multiple Choice

Assume that the MPC is 0.75. Assuming only the multiplier effect matters, how will an increase in government purchases of $400 billion shift the aggregate demand curve?

A) It will shift the aggregate demand curve left by $150 billion.
B) It will shift the aggregate demand curve left by $250 billion.
C) It will shift the aggregate demand curve right by $750 billion.
D) It will shift the aggregate demand curve right by $1600 billion.