APFIVE Government Spending and Transfer Multipliers
A government implements a $300 billion transfer payment program for low-income households with an MPC of 0.9, while simultaneously reducing government purchases by $300 billion. What is the net effect on aggregate demand?
A
Aggregate demand remains unchanged
B
Aggregate demand decreases by $300 billion
C
Aggregate demand decreases by $30 billion
D
Aggregate demand increases by $270 billion
Question Leaderboard
Not enough data yet to show leaderboard.