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:

Salmon

A species of fish commonly found in the Atlantic and Pacific Oceans, known for its pink to orange flesh.

Smoot-Hawley Tariff

A set of protectionist tariffs enacted in 1930 in the United States, which raised import duties on thousands of goods, contributing to the severity and duration of the Great Depression.

Dumping

The practice of a company selling a product in a foreign market at a price lower than its cost of production or lower than the price in its domestic market.

Comparative Advantage

The ability of an individual, company, or country to produce a good or service at a lower opportunity cost than competitors, leading to more efficient international trade.