An Estimate of the MPC in the U

question 151

Multiple Choice

An estimate of the MPC in the U.S. is 0.90.
Paul Krugman, the 2008 Nobel Prize winner in economics, stated, ʺ... youʹd be hard pressed to argue for an overall multiplier as high as 2.ʺ
What factors could explain the difference between the MPC and Krugmanʹs estimate of the multiplier?

• A) exports and investment.
• B) imports and taxes.
• C) investment and imports.
• D) taxes and investment.

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Definitions:

Separate Return Method

An approach used in the taxation of a group of related entities, where each entity files its own tax return instead of filing a single consolidated return.

Initial Value Method

An accounting method in which investments are recorded at their cost at the time of acquisition, without subsequent adjustment for market changes.

Percentage Allocation Method

A method used in various financial and accounting practices where costs or revenues are allocated based on a specified percentage to different objects or activities.

Income Tax Expense

The total amount of income tax a company is obligated to pay to the government, calculated based on the taxable income of the business.