If the Marginal Propensity to Consume Is 0

question 1

Multiple Choice

If the marginal propensity to consume is 0.85, the value of the spending multiplier will be

• A) 0.15.
• B) 1.17.
• C) 5.1.
• D) 6.67.

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Definitions:

Temporary Accounts

Accounts that are closed at the end of each accounting period; examples include revenue, expense, and dividend accounts.

Owner's Capital Account

An account that represents the total equity or ownership interest of the owner(s) in a business, reflecting contributions and withdrawals.

Closing Entries

Entries recorded at the conclusion of an accounting cycle to shift balances from temporary to permanent accounts.

Ledger

A book or other collection of financial accounts where all transactions are summarized and recorded.