If the Marginal Propensity to Save Is 0

question 43

Multiple Choice

If the marginal propensity to save is 0.25, the multiplier is

• A) 1.33.
• B) 3.
• C) 3.33.
• D) 4.

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Definitions:

Sensitivity of EPS

The degree to which a company's earnings per share (EPS) is affected by fluctuations in its operating income.

ROE

A measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested.

Target Capital Structure

The optimal mix of debt, preferred stock, and common equity that a company aims to maintain for financing its operations.

Debt-equity Ratio

A gauge of how shareholders' equity and debt proportionately finance a company’s assets.