Deck 34: 2:sec 342 Mc How Fiscal Policy Influences Aggregate Demand

Question 1

The marginal propensity to consume (MPC)is defined as the fraction of

A)extra income that a household consumes rather than saves.
B)extra income that a household either consumes or saves.
C)total income that a household consumes rather than saves.
D)total income that a household either consumes or saves.

Answer 1

B

Question 2

Figure 34-8
Refer to Figure 34-8.An increase in government purchases will

A)shift aggregate demand from AD₁ to AD₂.
B)shift aggregate demand from AD₁ to AD₃.
C)cause movement from point A to point B along AD₁.
D)have no effect on aggregate demand.

Answer 2

C

Question 3

The logic of the multiplier effect applies

A)only to changes in government spending.
B)to any change in spending on any component of GDP.
C)only to changes in the money supply.
D)only when the crowding-out effect is sufficiently strong.

Answer 3

D

Question 4

If the MPC = 0.75,then the government purchases multiplier is about

A)1.33.
B)7.
C)4.
D)3.

Question 5

If the multiplier is 6,then the MPC is

A)0.16.
B)0.83.
C)0.71.
D)0.86.

Question 6

Government purchases are said to have a

A)multiplier effect on aggregate supply.
B)multiplier effect on aggregate demand.
C)liquidity-enhancing effect on aggregate supply.
D)liquidity-enhancing effect on aggregate demand.

Question 7

Figure 34-8
Refer to Figure 34-8.An increase in taxes will

A)shift aggregate demand from AD₁ to AD₂.
B)shift aggregate demand from AD₁ to AD₃.
C)cause movement from point A to point B along AD₁.
D)have no effect on aggregate demand.

Question 8

Suppose an economy's marginal propensity to consume (MPC)is 0.6.Then

A)1 + MPC + MPC ² + MPC ³ = 1.844 and,if we continued adding up terms in this geometric series,we would get closer and closer to the multiplier value of 1.96.
B)1 + MPC + MPC ² + MPC ³ = 1.844 and,if we continued adding up terms in this geometric series,we would get closer and closer to the multiplier value of 3.
C)1 + MPC + MPC ² + MPC ³ = 2.176 and,if we continued adding up terms in this geometric series,we would get closer and closer to the multiplier value of 3.
D)1 + MPC + MPC ² + MPC ³ = 2.176 and,if we continued adding up terms in this geometric series,we would get closer and closer to the multiplier value of 2.5.

Question 9

In a certain economy,when income is $100,consumer spending is $60.The value of the multiplier for this economy is 4.It follows that,when income is $101,consumer spending is

A)$60.25.
B)$60.75.
C)$61.33.
D)$64.00.

Question 10

If the MPC = 4/5,then the government purchases multiplier is

A)5/4.
B)4/5.
C)5.
D)20.

Question 11

In a certain economy,when income is $500,consumer spending is $375.The value of the multiplier for this economy is 5.It follows that,when income is $510,consumer spending is

A)$381.67.
B)$378.
C)$383.
D)$383.33.

Question 12

Which of the following is an example of an increase in government purchases?

A)The government builds new roads.
B)The Federal Reserve purchases government bonds.
C)The government decreases personal income taxes.
D)The government increases unemployment insurance benefit payments.

Question 13

If the multiplier is 5.25,then the MPC is

A)0.19.
B)0.68.
C)0.81.
D)0.84.

Question 14

In a certain economy,when income is $1000,consumer spending is $800.The value of the multiplier for this economy is 2.5.It follows that,when income is $1020,consumer spending is

A)$816.For this economy,an initial increase of $100 in consumer spending translates into a $250 increase in aggregate demand.
B)$816.For this economy,an initial increase of $100 in consumer spending translates into a $400 increase in aggregate demand.
C)$812.For this economy,an initial increase of $100 in consumer spending translates into a $250 increase in aggregate demand.
D)$812.For this economy,an initial increase of $100 in consumer spending translates into an $800 increase in aggregate demand.

Question 15

In the long run,fiscal policy influences

A)saving,investment,and growth;in the short run,fiscal policy primarily influences technology and the production function.
B)saving,investment,and growth;in the short run,fiscal policy primarily influences the aggregate demand for goods and services.
C)technology and the production function;in the short run,fiscal policy primarily influences saving,investment,and growth.
D)the aggregate demand for goods and services;in the short run,fiscal policy primarily influences technology and the production function.

Question 16

Which of the following policy actions shifts the aggregate-demand curve?

A)an increase in the money supply
B)an increase in taxes
C)an increase in government spending
D)All of the above are correct.

Question 17

If the multiplier is 3,then the MPC is

A)1/3.
B)3/4.
C)4/3.
D)2/3.

Question 18

Fiscal policy refers to the idea that aggregate demand is affected by changes in

A)the money supply.
B)government spending and taxes.
C)trade policy.
D)All of the above are correct.

Question 19

The multiplier for changes in government spending is calculated as

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

Question 20

In a certain economy,when income is $400,consumer spending is $325.The value of the multiplier for this economy is 3.33.It follows that,when income is $450,consumer spending is

A)$360.For this economy,an initial increase of $50 in consumer spending translates into a $266.67 increase in aggregate demand.
B)$360.For this economy,an initial increase of $50 in consumer spending translates into a $166.50 increase in aggregate demand.
C)$341.67.For this economy,an initial increase of $50 in consumer spending translates into a $266.67 increase in aggregate demand.
D)$341.67.For this economy,an initial increase of $50 in consumer spending translates into a $166.25 increase in aggregate demand.

Question 21

Scenario 34-1.Take the following information as given for a small,imaginary economy:
• When income is $10,000,consumption spending is $6,500.
• When income is $11,000,consumption spending is $7,250.
Refer to Scenario 34-1.For this economy,an initial increase of $200 in net exports translates into a(n)

A)$570 increase in aggregate demand when the crowding-out effect is taken into account.
B)$800 increase in aggregate demand when the crowding-out effect is taken into account.
C)$1,400 increase in aggregate demand in the absence of the crowding-out effect.
D)$800 increase in aggregate demand in the absence of the crowding-out effect.

Question 22

An increase in government spending initially and primarily shifts

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)neither aggregate demand nor aggregate supply in either direction.

Question 23

In order to simplify the equation for the multiplier to its familiar,relatively simple form,we make use of the

A)assumption that increases in government purchases have no effect on consumer spending.
B)assumption that the feedback effects associated with changes in government purchases become negligible after two or three rounds of spending have occurred.
C)empirical evidence that points to a value of about 3/4 for the MPC.
D)fact that the multiplier effect is represented by an infinite geometric series.

Question 24

Figure 34-6.On the left-hand graph,MS represents the supply of money and MD represents the demand for money;on the right-hand graph,AD represents aggregate demand.The usual quantities are measured along the axes of both graphs.
Refer to Figure 34-6.Suppose the multiplier is 3 and the government increases its purchases by $25 billion.Also,suppose the AD curve would shift from AD₁ to AD₂ if there were no crowding out;the AD curve actually shifts from AD₁ to AD₃ with crowding out.Finally,assume the horizontal distance between the curves AD₁ and AD₃ is $40 billion.The extent of crowding out,for any particular level of the price level,is

A)$15 billion.
B)$40 billion.
C)$35 billion.
D)$95 billion.

Question 25

The idea that expansionary fiscal policy has a positive affect on investment is known as

A)monetary policy.
B)crowding out.
C)the investment accelerator.
D)the multiplier.

Question 26

Figure 34-5.On the figure,MS represents money supply and MD represents money demand.
Refer to Figure 34-5.A shift of the money-demand curve from MD₁ to MD₂ could be a result of

A)a decrease in taxes.
B)an increase in government spending.
C)an increase in the price level.
D)All of the above are correct.

Question 27

Scenario 34-1.Take the following information as given for a small,imaginary economy:
• When income is $10,000,consumption spending is $6,500.
• When income is $11,000,consumption spending is $7,250.
Refer to Scenario 34-1.The multiplier for this economy is

A)2.85.
B)1.53.
C)4.00.
D)7.00.

Question 28

Which of the following tends to make aggregate demand shift further to the right than the amount by which government expenditures increase?

A)the crowding-out effect
B)the multiplier effect
C)the exchange-rate effect
D)the interest-rate effect

Question 29

Figure 34-5.On the figure,MS represents money supply and MD represents money demand.
Refer to Figure 34-5.A shift of the money-demand curve from MD₂ to MD₁ is consistent with which of the following sets of events?

A)The government cuts taxes,resulting in an increase in people's incomes.
B)The government reduces government spending,resulting in a decrease in people's incomes.
C)The Federal Reserve increases the supply of money,which decreases the interest rate.
D)All of the above are correct.

Question 30

Figure 34-6.On the left-hand graph,MS represents the supply of money and MD represents the demand for money;on the right-hand graph,AD represents aggregate demand.The usual quantities are measured along the axes of both graphs.
Refer to Figure 34-6.Suppose the multiplier is 5 and the government increases its purchases by $15 billion.Also,suppose the AD curve would shift from AD₁ to AD₂ if there were no crowding out;the AD curve actually shifts from AD₁ to AD₃ with crowding out.Also,suppose the horizontal distance between the curves AD₁ and AD₃ is $55 billion.The extent of crowding out,for any particular level of the price level,is

A)$75 billion.
B)$40 billion.
C)$30 billion.
D)$20 billion.

Question 31

The multiplier effect states that there are additional shifts in aggregate demand from fiscal policy,because it

A)reduces investment and thereby increases consumer spending.
B)increases the money supply and thereby reduces interest rates.
C)increases income and thereby increases consumer spending.
D)decreases income and thereby increases consumer spending.

Question 32

The multiplier effect is exemplified by the multiplied impact on

A)the money supply of a given increase in government purchases.
B)tax revenues of a given increase in government purchases.
C)investment of a given increase in interest rates.
D)aggregate demand of a given increase in government purchases.

Question 33

A decrease in government spending initially and primarily shifts

A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)neither aggregate demand nor aggregate supply.

Question 34

Scenario 34-1.Take the following information as given for a small,imaginary economy:
• When income is $10,000,consumption spending is $6,500.
• When income is $11,000,consumption spending is $7,250.
Refer to Scenario 34-1.The marginal propensity to consume for this economy is

A)0.650.
B)0.750.
C)0.650 or 0.664,depending on whether income is $10,000 or $11,000.
D)0.800.

Question 35

The government buys new weapons systems.The manufacturers of weapons pay their employees.The employees spend this money on goods and services.The firms from which the employees buy the goods and services pay their employees.This sequence of events illustrates

A)the accelerator effect.
B)the multiplier effect.
C)the chain effect.
D)the bandwagon effect.

Question 36

Suppose the multiplier has a value that exceeds 1,and there are no crowding out or investment accelerator effects.Which of the following would shift aggregate demand to the right by more than the increase in expenditures?

A)an increase in government expenditures
B)an increase in net exports
C)an increase in investment spending
D)All of the above are correct.

Question 37

Which of the following events shifts aggregate demand rightward?

A)an increase in government expenditures or a decrease in the price level
B)a decrease in government expenditures or an increase in the price level
C)an increase in government expenditures,but not a change in the price level
D)a decrease in the price level,but not an increase in government expenditures

Question 38

The government builds a new water-treatment plant.The owner of the company that builds the plant pays her workers.The workers increase their spending.Firms from which the workers buy goods increase their output.This type of effect on spending illustrates

A)the multiplier effect.
B)the crowding-out effect.
C)the Fisher effect.
D)the wealth effect.

Question 39

Figure 34-6.On the left-hand graph,MS represents the supply of money and MD represents the demand for money;on the right-hand graph,AD represents aggregate demand.The usual quantities are measured along the axes of both graphs.
Refer to Figure 34-6.Suppose the graphs are drawn to show the effects of an increase in government purchases.If it were not for the increase in r from r₁ to r₂,then

A)there would be no crowding out.
B)the full multiplier effect of the increase in government purchases would be realized.
C)the AD curves that actually apply,before and after the change in government purchases,would be separated horizontally by the distance equal to the multiplier times the change in government purchases.
D)All of the above are correct.

Question 40

Figure 34-5.On the figure,MS represents money supply and MD represents money demand.
Refer to Figure 34-5.What is measured along the vertical axis of the graph?

A)the quantity of output
B)the amount of crowding out
C)the interest rate
D)the price level

Question 41

Assuming a multiplier effect,but no crowding-out or investment-accelerator effects,a $100 billion increase in government expenditures shifts aggregate

A)demand rightward by more than $100 billion.
B)demand rightward by less than $100 billion.
C)supply leftward by more than $100 billion.
D)supply leftward by less than $100 billion.

Question 42

If net exports fall $40 billion,the MPC is 9/11,and there is a multiplier effect but no crowding out and no investment accelerator,then

A)aggregate demand falls by 2 x $40 billion.
B)aggregate demand falls by 11/2 x $40 billion.
C)aggregate demand falls by 11/9 x $40 billion.
D)aggregate demand falls by 9/11 x $40 billion.

Question 43

The positive feedback from aggregate demand to investment is called

A)the investment multiplier.
B)the crowding-out effect.
C)the investment accelerator.
D)the crowding-in multiplier.

Question 44

The process of the investment accelerator involves

A)positive feedback from aggregate demand to investment.
B)negative feedback from aggregate demand to investment.
C)positive feedback from aggregate supply to investment.
D)negative feedback from aggregate supply to investment.

Question 45

The term crowding-out effect refers to

A)the reduction in aggregate supply that results when a monetary expansion causes the interest rate to decrease.
B)the reduction in aggregate demand that results when a monetary expansion causes the interest rate to decrease.
C)the reduction in aggregate demand that results when a fiscal expansion causes the interest rate to increase.
D)the reduction in aggregate demand that results when a decrease in government spending or an increase in taxes causes the interest rate to increase.

Question 46

If the marginal propensity to consume is 0.75,and there is no investment accelerator or crowding out,a $15 billion increase in government expenditures would shift the aggregate demand curve right by

A)$60 billion,but the effect would be larger if there were an investment accelerator.
B)$60 billion,but the effect would be smaller if there were an investment accelerator.
C)$45 billion,but the effect would be larger if there were an investment accelerator.
D)$45 billion,but the effect would be smaller if there were an investment accelerator.

Question 47

Which of the following is an example of crowding out?

A)An increase in government spending increases interest rates,causing investment to fall.
B)A decrease in private savings increases interest rates,causing investment to fall.
C)A decrease in the money supply increases interest rates,causing investment to fall.
D)An increase in taxes increases interest rates,causing investment to fall.

Question 48

Which of the following illustrates how the investment accelerator works?

A)An increase in government expenditures increases the interest rate so that the Burgerville chain of restaurants decides to build fewer new restaurants.
B)An increase in government expenditures increases aggregate spending so that Burgerville finds it profitable to build more new restaurants.
C)An increase in government expenditures increases the interest rate so that the demand for stocks and bonds issued by Burgerville increases.
D)An increase in government expenditures decreases the interest rate so that Burgerville decides to build more new restaurants.

Question 49

Sometimes during wars,government expenditures are larger than normal.To reduce the effects this spending creates on interest rates,

A)the Federal Reserve could increase the money supply by buying bonds.
B)the Federal Reserve could increase the money supply by selling bonds.
C)the Federal Reserve could decrease the money supply by buying bonds.
D)the Federal Reserve could decrease the money supply by selling bonds.

Question 50

A decrease in government spending

A)increases the interest rate and so investment spending increases.
B)increases the interest rate and so decreases investment spending decreases.
C)decreases the interest rate and so investment spending increases.
D)decreases the interest rate and so investment spending decreases.

Question 51

An increase in government spending

A)increases the interest rate and so investment spending increases.
B)increases the interest rate and so investment spending decreases.
C)decreases the interest rate and so increases investment spending increases.
D)decreases the interest rate and so investment spending decreases.

Question 52

Assume there is a multiplier effect,some crowding out,and no accelerator effect.An increase in government expenditures changes aggregate demand more,

A)the smaller the MPC and the stronger the influence of income on money demand.
B)the smaller the MPC and the weaker the influence of income on money demand.
C)the larger the MPC and the stronger the influence of income on money demand.
D)the larger the MPC and the weaker the influence of income on money demand.

Question 53

Which of the following illustrates how the investment accelerator works?

A)An increase in government expenditures increases aggregate spending so that SnoozeBargain Co.decides to modernize its motels.
B)An increase in government expenditures increases the interest rate so that SnoozeBargain Co.decides to modernize its motels.
C)An increase in government expenditures increases the interest rate so that the demand for stocks and bonds issued by SnoozeBargain Co.rises.
D)An increase in government expenditures decreases the interest rate so that SnoozeBargain Co.decides to modernize its motels.

Question 54

Assuming no crowding-out,investment-accelerator,or multiplier effects,a $100 billion increase in government expenditures shifts aggregate demand

A)right by more than $100 billion.
B)right by $100 billion.
C)left by more than $100 billion.
D)left by $100 billion.

Question 55

If the MPC is 0.8 and there are no crowding-out or accelerator effects,then an initial increase in aggregate demand of $120 billion will eventually shift the aggregate demand curve to the right by

A)$216 billion.
B)$150 billion.
C)$600 billion.
D)$480 billion.

Question 56

If the investment accelerator from an increase in government purchases is larger than the crowding-out effect,then

A)the multiplier is probably zero.
B)the multiplier is probably equal to one.
C)the multiplier is probably greater than one.
D)the multiplier is probably less than one.

Question 57

The change in aggregate demand that results from fiscal expansion changing the interest rate is called the

A)multiplier effect.
B)crowding-out effect.
C)accelerator effect.
D)Ricardian equivalence effect.

Question 58

Suppose there are both multiplier and crowding out effects but without any accelerator effects.An increase in government expenditures would

A)shift aggregate demand right by a larger amount than the increase in government expenditures.
B)shift aggregate demand right by the same amount as the increase in government expenditures.
C)shift aggregate demand right by a smaller amount than the increase in government expenditures.
D)Any of the above outcomes are possible.

Question 59

To reduce the effects of crowding out caused by an increase in government expenditures,the Federal Reserve could

A)increase the money supply by buying bonds.
B)increase the money supply by selling bonds.
C)decrease the money supply by buying bonds.
D)increase the money supply by selling bonds.

Question 60

Which of the following correctly explains the crowding-out effect?

A)An increase in government expenditures decreases the interest rate and so increases investment spending.
B)An increase in government expenditures increases the interest rate and so reduces investment spending.
C)A decrease in government expenditures increases the interest rate and so increases investment spending.
D)A decrease in government expenditures decreases the interest rate and so reduces investment spending.

Question 61

Tax increases

A)and increases in government expenditures shift aggregate demand right.
B)and increases in government expenditures shift aggregate demand left.
C)shift aggregate demand right while increases in government expenditures shift aggregate demand left.
D)shift aggregate demand left while increases in government expenditures shift aggregate demand right.

Question 62

If taxes

A)increase,then consumption increases,and aggregate demand shifts leftward.
B)increase,then consumption decreases,and aggregate demand shifts rightward.
C)decrease,then consumption increases,and aggregate demand shifts rightward.
D)decrease,then consumption decreases,and aggregate demand shifts leftward.

Question 63

If the MPC is 5/6 then the multiplier is

A)6/5,so a $200 increase in government spending increases aggregate demand by $240.
B)5,so a $200 increase in government spending increases aggregate supply by $1000.
C)6,so a $200 increase in government spending increases aggregate demand by $1200.
D)6/5,so a $200 increase in government spending increases aggregate supply by $1200.

Question 64

Assume the MPC is 0.72.The multiplier is

A)4.53.
B)1.39.
C)2.57.
D)3.57.

Question 65

If the MPC is 3/5 then the multiplier is

A)4,so a $100 increase in government spending increases aggregate demand by $400.
B)1.5,so a $100 increase in government spending increases output by $150.
C)2.5,so a $100 increase in government spending increases aggregate demand by $250.
D)1.67,so a $100 increase in government spending increases output by $166.67.

Question 66

As the MPC gets close to 1,the value of the multiplier approaches

A)0.
B)1.
C)infinity.
D)None of the above is correct.

Question 67

The multiplier effect

A)and the crowding-out effect both amplify the effects of an increase in government expenditures.
B)and the crowding-out effect both diminish the effects of an increase in government expenditures.
C)diminishes the effects of an increase in government expenditures,while the crowding-out effect amplifies the effects.
D)amplifies the effects of an increase in government expenditures,while the crowding-out effect diminishes the effects.

Question 68

Scenario 34-2.The following facts apply to a small,imaginary economy.
• Consumption spending is $6,720 when income is $8,000.
• Consumption spending is $7,040 when income is $8,500.
Refer to Scenario 34-2.The marginal propensity to consume for this economy is

A)0.64.
B)0.83.
C)0.56.
D)0.840.

Question 69

An increase in the MPC

A)increases the multiplier,so that changes in government expenditures have a larger effect on aggregate demand.
B)increases the multiplier,so that changes in government expenditures have a smaller effect on aggregate demand.
C)decreases the multiplier,so that changes in government expenditures have a larger effect on aggregate demand.
D)decreases the multiplier,so that changes in government expenditures have a smaller effect on aggregate demand.

Question 70

Assume the MPC is 0.625.Assume there is a multiplier effect and that the total crowding-out effect is $12 billion.An increase in government purchases of $30 billion will shift aggregate demand to the

A)left by $60 billion.
B)left by $36 billion.
C)right by $68 billion.
D)right by $36 billion.

Question 71

Suppose that the MPC is 0.7,there is no investment accelerator,and there are no crowding-out effects.If government expenditures increase by $30 billion,then aggregate demand

A)shifts rightward by $100 billion.
B)shifts rightward by $51 billion.
C)shifts rightward by $170 billion.
D)shifts rightward by $72.8 billion.

Question 72

Scenario 34-2.The following facts apply to a small,imaginary economy.
• Consumption spending is $6,720 when income is $8,000.
• Consumption spending is $7,040 when income is $8,500.
Refer to Scenario 34-2.The multiplier for this economy is

A)1.31.
B)6.25.
C)2.78.
D)2.27.

Question 73

Assume the multiplier is 5 and that the crowding-out effect is $30 billion.An increase in government purchases of $20 billion will shift the aggregate-demand curve to the

A)right by $130 billion.
B)right by $70 billion.
C)right by $50 billion.
D)right by $10 billion.

Question 74

Scenario 34-2.The following facts apply to a small,imaginary economy.
• Consumption spending is $6,720 when income is $8,000.
• Consumption spending is $7,040 when income is $8,500.
Refer to Scenario 34-2.In response to which of the following events could aggregate demand increase by $1,500?

A)A stock-market boom stimulates consumer spending by $300,and there is an operative crowding-out effect.
B)A stock-market boom stimulates consumer spending by $550,and there is a small operative crowding-out effect.
C)An economic boom overseas increases the demand for U.S.net exports by $550,and there is no crowding-out effect.
D)An economic boom overseas increases the demand for U.S.net exports by $300,and there is no crowding-out effect.

Question 75

An increase in government purchases is likely to

A)decrease interest rates.
B)reduce money demand.
C)crowd out investment spending by business firms.
D)All of the above are correct.

Question 76

Scenario 34-2.The following facts apply to a small,imaginary economy.
• Consumption spending is $6,720 when income is $8,000.
• Consumption spending is $7,040 when income is $8,500.
Refer to Scenario 34-2.For this economy,an initial increase of $500 in government purchases translates into a

A)$1,388.89 increase in aggregate demand in the absence of the crowding-out effect.
B)$3,125.00 increase in aggregate demand in the absence of the crowding-out effect.
C)$1,135 increase in aggregate demand when the crowding-out effect is taken into account.
D)$3,125.00 increase in aggregate demand when the crowding-out effect is taken into account.

Question 77

Assume the MPC is 0.8.Assuming only the multiplier effect matters,a decrease in government purchases of $100 billion will shift the aggregate demand curve to the

A)left by $180 billion.
B)left by $500 billion.
C)right by $180 billion.
D)right by $400 billion.

Question 78

If the MPC is 0,then the multiplier is

A)0.
B)1.
C)infinite.
D)None of the above is correct.

Question 79

Scenario 34-2.The following facts apply to a small,imaginary economy.
• Consumption spending is $6,720 when income is $8,000.
• Consumption spending is $7,040 when income is $8,500.
Refer to Scenario 34-2.In response to which of the following events could aggregate demand increase by $1,500?

A)A stock-market boom increases households' wealth by $500,and there is an operative crowding-out effect.
B)A stock-market boom increases households' wealth by $575,and there is an operative crowding-out effect.
C)An economic boom overseas increases the demand for U.S.net exports by $600,and there is no crowding-out effect.
D)Aggregate demand could increase by $1,500 in response to any of these events.

Question 80

Assume the MPC is 0.65.Assuming only the multiplier effect matters,a decrease in government purchases of $20 billion will shift the aggregate demand curve to the

A)left by about $30.77 billion.
B)left by about $57.1 billion.
C)right by about $57.1 billion.
D)right by about $30.77 billion.