If the Marginal Propensity to Consume Is 0

question 292

Multiple Choice

If the marginal propensity to consume is 0.8 and there no income taxes or imports, the multiplier for a change in autonomous expenditure equals

• A) 4.0.
• B) 1.0
• C) 0.8.
• D) 5.0.

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Definitions:

Income Statement

A fiscal report displaying a business's incoming funds, outgoings, and profit for a designated time frame.

Relevant Range

The span of activity level within which the assumptions about variable and fixed cost behaviors hold true.

High-low Method

A technique used in managerial accounting to estimate fixed and variable costs by analyzing the highest and lowest levels of activity and the associated costs.

Variable Cost

A cost that varies directly with the level of production or volume, such as materials and labor directly involved in the production process.