Suppose a market basket of goods and services costs 400 in the base year and 500 this year. The consumer price index (CPI) for this year is:
a. 25.
b. 100.
c. 125.
d. 500.
Question 2
Following Keynesian economics, and assuming a marginal propensity to consume (MPC) of 0.75, an increase in federal government spending of 100 billion at below full employment would be expected to shift the aggregate demand curve by 300 billion to the right.
a. True
b. False
Indicate whether the statement is true or false
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