If the Value of the Multiplier in a Closed Economy

question 99

Multiple Choice

If the value of the multiplier in a closed economy with no government sector is equal to 5, then which of the following is true?

• A) The level of output of goods and services in the economy will equal 100.
• B) The marginal propensity to consume in the economy will be equal to 0.4.
• C) The level of investment in the economy will be equal to 400.
• D) The marginal propensity to save in the economy will be equal to 0.2.

---

Definitions:

Bonds Payable

Bonds payable refers to long-term debt instruments issued by a company to investors, promising to pay back with interest at specified maturity dates.

Operating Activities

Cash flow activities that include the cash effects of transactions that create revenues and expenses and thus enter into the determination of net income.

Issuance of Debt

The process by which a company borrows money through the sale of bonds or taking out loans, creating a liability that must be repaid in the future.

Retirement of Debt

The process of paying off debt obligations or securities over time through systematic repayments or a lump-sum payment.