If the Marginal Propensity to Consume Is 0

question 134

Multiple Choice

If the marginal propensity to consume is 0.9 in a private closed economy, a $20 billion decline in investment spending will decrease

• A)GDP by $20 billion.
• B)GDP by $100 billion.
• C)saving by $20 billion.
• D)consumption by $200 billion.

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Definitions:

Liabilities

Financial obligations or debts that a business or individual owes to others, which must be settled over time through the transfer of economic benefits including money, goods, or services.

Assets

Items of value owned by a person or company, including physical property, financial holdings, and intangible items that can be converted into cash.

Cash Budgets

Financial plans that forecast a company's cash inflows, outflows, and net cash balance for a specific period.

Acid-Test Ratio

A financial metric that evaluates a company's ability to pay off its current liabilities with its easily liquidated assets, also known as the quick ratio.