If Income Is $50,000, Consumption Is $47,500, and Saving Is

question 144

Multiple Choice

If income is $50,000, consumption is $47,500, and saving is $2,500, then the marginal propensity to consume is:

• A) 0.95.
• B) 0.50.
• C) 0.05.
• D) There is not enough information to answer this question.

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Definitions:

Idiosyncratic Risk

The risk associated with an individual asset, which can be mitigated through diversification.

Systematic Risk

Systematic risk refers to the inherent risk that affects the entire market or a major market segment and cannot easily be mitigated through diversification.

Diversifiable Risk

A type of investment risk that can be reduced or eliminated through diversification of an investment portfolio.

Systematic Risk

The danger that affects the whole market or a specific sector of the market, commonly referred to as market risk or non-diversifiable risk.