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If the Marginal Propensity to Consume (MPC) Is 0

Question 8

Multiple Choice

If the marginal propensity to consume (MPC) is 0.75 and government purchases increase by $100 billion, then


A) equilibrium real Gross Domestic Product (GDP) will increase by $400 billion.
B) equilibrium real Gross Domestic Product (GDP) will increase by $200 billion.
C) equilibrium real Gross Domestic Product (GDP) will increase by $40 billion.
D) the effect on equilibrium real Gross Domestic Product (GDP) cannot be determined from the given information.

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