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.
c
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Efficient production implies that it is:
A) possible to produce more of all goods and services. B) it is possible to produce more of one good without producing less of another. C) not possible to produce more of one good without producing less of another good. D) producing at a combination of goods which lies between the production possibilities curve and the origin.
In the DMP model, an increase in the unemployment insurance benefit does not, under any circumstances
A) increase the vacancy rate. B) increase the unemployment rate. C) reduce labor market tightness. D) reduce the size of the labor force.