In a Closed Economy with No Government Sector, the Marginal

question 39

Multiple Choice

In a closed economy with no government sector, the marginal propensity to save (MPS) is 0.25. Therefore, the value of the multiplier will be equal to _____.

• A) 5
• B) 1.33
• C) 2
• D) 4

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Definitions:

Discount Rate

The interest rate used to discount future cash flows to their present value, reflecting the opportunity cost of capital.

Internal Rate Of Return

A financial metric used to estimate the profitability of potential investments, calculated as the rate that makes the net present value of all cash flows from a particular project equal to zero.

Net Present Value

A calculation of the present value of cash inflows minus the present value of cash outflows over a period of time, used in capital budgeting.

Salvage Value

Salvage value is the estimated resale or scrap value of an asset at the end of its useful life.