Assume that the full-employment level of output is $2,000 and the price level associated with full-employment output is 100. Also assume that the economy's current level of output is $1,900 and, at the price level of 100, current aggregate demand is $1,850. If the government moves the economy back to the full-employment level of output by increasing government purchases by $30, then the MPC equals

a. 0.8.

b. 0.75.

c. 0.6.

d. 0.5.

Question

Adam

Business

28 June, 07:50

Assume that the full-employment level of output is $2,000 and the price level associated with full-employment output is 100. Also assume that the economy's current level of output is $1,900 and, at the price level of 100, current aggregate demand is $1,850. If the government moves the economy back to the full-employment level of output by increasing government purchases by $30, then the MPC equals

a. 0.8.

b. 0.75.

c. 0.6.

d. 0.5.

+4

Answers (1)

Know the Answer?

Leroy Armstrong · Answer 1

a. 0.8

Explanation:

In economics the MPC is the marginal propensity to consume. This percentage is usually multiplied by the disposable income to figure out how much money people in an economy will spend.