If MPC = 0

question 31

Multiple Choice

If MPC = 0.75 (and there are no income taxes but only lump-sum taxes) when T decreases by 100, then the IS curve for any given interest rate shifts to the right by:

• A)100.
• B)200.
• C)300.
• D)400.

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Definitions:

Present Value

The current value of a future amount of money or stream of cash flows given a specified rate of return.

Ordinary Annuity

A series of equal payments made at regular intervals, such as monthly or annually, over a specified period.

Annuity Due

An annuity payment arrangement where payments are made at the beginning of each period, as opposed to the end, which is the case with an ordinary annuity.

Return Requirement

A specified rate of return that investors expect to receive from an investment.