If the Marginal Propensity to Consume Is 0

question 159

Multiple Choice

If the marginal propensity to consume is 0.6, the marginal propensity to save is 0.4, and government spending increases by $2 billion at the same time taxes rise by $2 billion, equilibrium income will:

• A) rise by $2 billion.
• B) not change.
• C) fall by $2 billion.
• D) rise by $5 billion.

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Definitions:

Combine

To merge or bring together two or more elements to form a single entity or total.

Simplify

Refers to making an expression or problem easier to work with by reducing it to its most basic form.

Combine

Refers to the process of joining two or more items together to form a single entity, used in various contexts including mathematics, where it may involve summing like terms.

Combine

The act of joining or merging two or more items into a single entity, often used in mathematical operations like addition or combination.