Suppose an Economy's Marginal Propensity to Consume (MPC) Is 0

question 97

Multiple Choice

Suppose an economy's marginal propensity to consume (MPC) is 0.6. Then 1 + MPC + MPC² + MPC³ = 2.176 and, if we continued adding up terms in this geometric series, we would get closer and closer to the multiplier value of

• A)1.96.
• B)3.
• C)1.67.
• D)2.5.

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Definitions:

Physical Differences

Variations in the bodily characteristics of individuals or entities, often used in the context of workforce skills or product characteristics.

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for slight differentiation and some price control.

Product Differentiation

The method of differentiating a product or service from its competitors in the marketplace to increase its appeal to a specific target audience.

Monopolistic Competitor

A firm operating in a monopolistic competition market, offering a unique product but competing with several other firms in terms of price, quality, and branding.