If the Marginal Propensity to Consume (MPC)is Equal to 0

question 101

Multiple Choice

If the marginal propensity to consume (MPC) is equal to 0.9,an increase in household income causes desired consumption expenditure to

• A)rise by more than the increase in income.
• B)rise by the full increase in income.
• C)rise by less than the full increase in income.
• D)fall,as an increase in income will increase saving.
• E)remain constant,because the MPC is also constant.

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Definitions:

Market Equilibrium

A condition or state in which the supply of a product matches its demand, leading to a stable price.

Surplus

An excess amount of a product or resource compared to the demand for it.

Minimum Wage

The lowest legal hourly rate of pay that employers can compensate workers.

Low-skill Workers

Employees possessing minimal technical training or education, often associated with tasks requiring lower levels of cognitive or manual skill.