Multiple Choice Questions on Suppose that the MPC is 0 8 and there are no proportional taxes If you want to decrease equilibrium ........... for SEBI Grade A ( Officer) Exam Preparation

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Multiple Choice Questions

Suppose that the MPC is 0 8 and there are no proportional taxes If you want to decrease equilibrium ...........

Economics- Phase (I & II) Multiplier and Accelerator 
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    Suppose that the MPC is 0.8 and there are no proportional taxes. If you want to decrease equilibrium output by $500, then you must change autonomous Aggregate Demand by

    +100

    Incorrect Answer

    -100

    Correct Answer

    +250

    Incorrect Answer

    -250

    Incorrect Answer

    -500

    Incorrect Answer
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    Explanation:

    Recall that;

    Change in Y = (output multiplier) x (initial change in AD),

    -500 = 5 x (initial change in AD),

    therefore initial change in AD = -500/5 ,

    initial change in AD = -100,

    , then change in autonomous Aggregate Demand by -100

    By: Jyoti Das
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