If households save $40 billion less at each level of income and the marginal propensity to consume (MPC) is 0.8, the aggregate expenditure line will _____
a. intersect the 45-degree line at a real GDP of $40 billion
b. shift upward by $40 billion
c. shift downward by $40 billion
d. shift upward by $200 billion because of the multiplier mechanism
e. shift downward by $200 billion because of the multiplier mechanism
b
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In order to prove that Dr. Pepper and 7-Up are substitutes, the FTC should test the __________ and get a __________
a. price elasticity of demand; number less than 1 b. income elasticity; positive number c. price elasticity; negative number d. price elasticity of demand; number greater than 1 e. cross elasticity; positive number
Which of the following situations will cause the supply of British pounds to rise in the foreign exchange market?
a. The price level in the United States rises faster than the price level in the United Kingdom. b. The real GDP in the United States grows while the real GDP in the United Kingdom remains constant. c. The interest rate in the United Kingdom falls while the interest rate in the United States remains constant. d. The tax rate in the United States rises while the tax rate in the United Kingdom does not change.