If the Marginal Propensity to Consume Were 0

question 5

Multiple Choice

If the marginal propensity to consume were 0.9 and a constant 20 percent tax were applied to all income, then an increase in income of $10 would cause consumption expenditure to climb by

• A) 72 percent.
• B) $0.72.
• C) $7.20.
• D) $9.00.
• E) $8.00.