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

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