If the Marginal Propensity to Consume Is 0

question 109

Multiple Choice

If the marginal propensity to consume is 0.8 and the government reduces taxes by $5 billion, equilibrium income will:

• A) fall by $25 billion.
• B) rise by $25 billion.
• C) rise by $20 billion.
• D) fall by $20 billion.

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Definitions:

Social Motives

are the underlying psychological forces that drive individuals to seek out and maintain relationships and interaction with others.

Cultural Display Rules

Norms or customs within a culture that dictate how emotions should be expressed or suppressed in various social contexts.

Social Desirability

The habit of people replying to questions in such a way that they think will impress or be approved by others.

Biological Motives

Biological motives refer to the innate drives that guide behavior and are necessary for survival, such as hunger, thirst, and the need for sleep.