QUESTION 7

1. The marginal propensity to consume (MPC) is defined as thefraction of:

   	A.	extra income that a household consumes rather than saves.
   	B.	extra income that a household either consumes or saves.
   	C.	total income that a household consumes rather than saves.
   	D.	total income that a household either consumes or saves.

What term is used for a government plan to reduce aggregatedemand? and slow the economy?

	A.	Contractionary fiscal policy
	B.	Discretionary fiscal policy
	C.	Expansionary fiscal policy
	D.	Stabilizing fiscal policy.

An increase in government purchases will…

	A.	shift aggregate demand from AD1 to AD2.
	B.	shift aggregate demand from AD1 to AD3.
	C.	cause movement from point A to point B along AD1.
	D.	have no effect on aggregate demand