Jeff and Lori's Disposable Income Rose from $80 000 Per

question 67

Multiple Choice

Jeff and Lori's disposable income rose from $80 000 per year to $84 000 and their desired consumption expenditure rose from $76 000 to $79 000.It can be concluded that their

• A)average propensity to consume is constant.
• B)average propensity to save is always 0.25.
• C)marginal propensity to consume decreased.
• D)marginal propensity to consume is 0.25.
• E)marginal propensity to save is 0.25.

---

Definitions:

Debt Capacity

The maximum amount of debt a business or entity can borrow without reaching financial distress.

Diversification Benefits

Advantages obtained from investing in a variety of assets, which helps to reduce risk by spreading exposure across different investments.

Purchase Accounting

An accounting method used to consolidate the financial statements of a acquiring company and the company it has acquired.

Net Asset Value

Net Asset Value is the total value of an entity’s assets minus its liabilities, often used in relation to the value of an investment fund.