In a Closed Economy with No Government Sector, the Marginal

question 60

Multiple Choice

In a closed economy with no government sector, the marginal propensity to consume (MPC) is 0.6. Therefore, the value of the multiplier will be equal to _____.

• A) 2
• B) 2.5
• C) 1.66
• D) 6

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Definitions:

Equity Buffer

Additional equity maintained by a financial institution above the regulatory minimum to absorb potential losses.

Ratios

Ratios are financial metrics derived from a company's financial statements, used to evaluate aspects such as its profitability, liquidity, and solvency.

Ratio Computation

The process of calculating financial ratios, which are mathematical tools used to analyze and compare financial statements.

Income Before Taxes

A financial measure indicating the profitability of a company before accounting for its tax expense.