Suppose the Marginal Propensity to Consume Is Equal to 0

question 143

Multiple Choice

Suppose the marginal propensity to consume is equal to 0.75.If the government lowers tax rates and tax revenue falls by $100 million,then disposable income will increase by________ million and consumption spending will initially increase by ________ million.

• A) $100; $75
• B) $100; $25
• C) $75; $25
• D) $75; $100
• E) $100; $100

---

Definitions:

Second Mortgage

A type of subordinate mortgage made while an original mortgage is still in effect, securing the collateral by the same property.

Amortized Loan

A loan with scheduled periodic payments that cover both interest and principal over a specific time period.

Monthly Mortgage Payment

The amount that is paid each month by a borrower to a lender for a home loan, which often includes principal, interest, taxes, and insurance.

Amortized Loan

A loan with scheduled periodic payments that consist of both principal and interest, typically enabling the loan to be paid off by its maturity date.