If You Spend $100 and the MPC Is 0

question 74

Multiple Choice

If you spend $100 and the MPC is 0.9, how much spending will this $100 generate in the economy?

• A) $1,000
• B) $500
• C) $250
• D) $100

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Definitions:

Efficiency Loss

The loss of economic efficiency that can occur when the equilibrium for a good or service is not achievable or not achieved.

Excise Tax

A tax charged on specific goods and services, such as tobacco, alcohol, and gasoline, typically imposed at the manufacturing or production level.

Perfectly Elastic

A situation in economics where the quantity demanded or supplied responds infinitely to changes in price.

Excise Tax

A tax levied on specific goods, services, or transactions, often included in the price of products like tobacco, alcohol, and gasoline.