If the Marginal Propensity to Consume Increases

question 115

Multiple Choice

If the marginal propensity to consume increases,

• A)firms will increase production.
• B)spending will remain above output until interest rates increase and equilibrium is restored.
• C)the expenditure line will shift upward in a parallel fashion.
• D)investment will have to fall to restore equilibrium.
• E)too much output is being produced, and firms will cut production until equilibrium is restored.

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Definitions:

Ethanol

An organic compound, also known as alcohol, with the formula C2H5OH, widely used as a solvent, in the manufacture of various goods, and as a renewable fuel.

Hexane

A hydrocarbon compound with six carbon atoms and 14 hydrogen atoms, often used as a non-polar solvent.

Polarity

The property of having distinct and opposite charges or magnetic poles, leading to a molecule having regions with slightly positive and slightly negative charges.

Benzene

A colorless, volatile liquid hydrocarbon with a distinctive sweet smell, C6H6, used as a solvent and in the manufacture of various chemicals.