If $1,000 of Additional Spending Occurs and the Marginal Propensity

question 202

Multiple Choice

If $1,000 of additional spending occurs and the marginal propensity to consume is 0.8, the total effect on the economy is an increase of _____ in income or output.

• A) $800
• B) $1,000
• C) $5,000
• D) $8,000

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Definitions:

Self-Serving Bias

The common human tendency to attribute successes to personal attributes and failures to external circumstances.

Actor-Observer Bias

The inclination to ascribe personal actions to outside factors and other individuals' actions to their inherent traits.

Matching Hypothesis

A theory in social psychology that suggests individuals are more likely to form and succeed in relationships with others who are similar to them in physical attractiveness.

Self-Serving Bias

A common cognitive bias that causes individuals to attribute their successes to internal factors and their failures to external ones.