If the Marginal Propensity to Consume Is 0

question 9

Multiple Choice

If the marginal propensity to consume is 0.2 and there is a $10 million increase in one component of spending, the aggregate demand curve will shift horizontally to the right by:

• A) $8 million.
• B) $15 million.
• C) $2 million.
• D) $12.5 million.

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Definitions:

Alpha

A measure of investment performance that indicates how an asset performs relative to a benchmark.

Overpriced

Describes an asset or security that is believed to be trading at a price higher than its intrinsic value.

Underpriced

A term used to describe a security or any financial instrument that is selling for a price believed to be below its true intrinsic value.

Well-diversified Portfolio

An investment portfolio that spreads risk by holding a wide variety of assets, potentially across different asset classes, sectors, and geographies.