If the government decides to spend an extra $4 billion on fighter jets that they would otherwise have spent on computers, and the mpc = 0.75, what is the effect on ad?

a. ad increases by $20 billion.

b. ad increases by $16 billion.

c. ad increases by $4 billion.

d. ad does not change.

Question

Business

Hugh Foley

6 January, 19:27

If the government decides to spend an extra $4 billion on fighter jets that they would otherwise have spent on computers, and the mpc = 0.75, what is the effect on ad?

a. ad increases by $20 billion.

b. ad increases by $16 billion.

c. ad increases by $4 billion.

d. ad does not change.

+3

Answers (1)

Know the Answer?

Lawson Frey · Answer 1

d. ad does not change.

Explanation:

Aggregate demand is defined as the total demand for finished products that is produced by a country. It is also called effective demand

In this instance aggregate demand will be a sum of demand for both computers and fighter jets. If the government decides to spend on fighter jets instead of computers, the aggregate demand will not change since it is total demand of both proucts.

If the government decides to spend an extra $4 billion on fighter jets that they would otherwise have spent on computers, and the mpc = 0.75, what is the effect on ad?a. ad increases by $20 billion.b. ad increases by $16 billion.c. ad increases by $4 billion.d. ad does not change.

If the government decides to spend an extra $4 billion on fighter jets that they would otherwise have spent on computers, and the mpc = 0.75, what is the effect on ad?

a. ad increases by $20 billion.

b. ad increases by $16 billion.

c. ad increases by $4 billion.

d. ad does not change.