Let Y = Real GDP and Y_d = Disposable Income

question 184

Multiple Choice

Let Y = real GDP and Y_d = disposable income. Suppose initially, Y = Y_d and the marginal propensity to consume (MPC) is 0.9. All components of aggregate expenditures except consumption are autonomous. Now suppose the government imposes an income tax rate of 20% on real GDP. What is the marginal propensity to consume following the imposition of an income tax?

• A) 0.7
• B) 0.72
• C) 0.18
• D) 1.1

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Definitions:

Productive Language

The aspect of language capability that involves producing words, phrases, and sentences to express thoughts and communicate.

Holophrasing

The use of a single word by a child to express a complex idea or sentence, a common stage in language development.

Babbling

A stage in child language acquisition, during which the child spontaneously utters meaningless sounds, often comprising syllables repeated in patterns similar to speech.

Cognitive Disability

A limitation in intellectual functioning and adaptive behavior, affecting learning, communication, and social skills.