If the Marginal Propensity to Consume Is 0

question 41

Multiple Choice

If the marginal propensity to consume is 0.6; full employment income is $1,000; and the current equilibrium is $750, a(n) _____ gap exists, such that a(n) _____ in spending equal to _____ is needed to close the gap.

• A) inflationary; decrease; $100
• B) inflationary; decrease; $250
• C) recessionary; increase; $100
• D) recessionary; increase; $250

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Definitions:

Segregation

The enforced separation of different racial groups in a country, community, or institution, often leading to discrimination and inequality.

U.S. Army

The land warfare service branch of the United States Armed Forces, responsible for land-based military operations.

National Resources Planning Board

A U.S. government agency active during the 1930s and early 1940s, part of the New Deal, that conducted research and planning regarding the use of natural resources.

Keynesian Economics

An economic theory stating that government intervention through monetary and fiscal policies is necessary to manage economic cycles and stimulate economic growth.