In a Simple Macro Model Where the Marginal Propensity to Consume

question 100

Multiple Choice

In a simple macro model where the marginal propensity to consume out of disposable income is 0.8,the net tax rate is 0.25,and the marginal propensity to import is 0.12,the simple multiplier will be

• A)0.480.
• B)1.471.
• C)1.923.
• D)2.083.
• E)2.110.

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Definitions:

Net Present Value Method

A method in capital budgeting that measures the profitability of an investment by calculating the present value of its expected cash flows minus the initial cost.

Annual Return

The percentage gain or loss on an investment over a one-year period.

Investment Decision

The process of evaluating and selecting where to allocate financial resources to achieve anticipated financial returns or gains.

Straight-Line Depreciation

A method of calculating the depreciation of an asset whereby the original cost is reduced equally across each year of its estimated useful life.