If Consumption Falls from $600 Billion to $575 Billion and the Marginal

question 219

Multiple Choice

If consumption falls from $600 billion to $575 billion and the marginal propensity to consume is 0.8, then equilibrium income will

• A) fall by $25 billion.
• B) fall by $125 billion.
• C) rise by $25 billion.
• D) rise by $125 billion.

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Definitions:

Television

An electronic system of transmitting transient images of fixed or moving objects together with sound over a wire or through space by apparatus that converts light and sound into electrical waves and reconverts them into visible light rays and audible sound.

Savings

Money set aside for future use, typically in accounts that earn interest.

Interest Annually

The total interest that accrues over the course of a year, either on investments or loans.

Payment Now

An immediate payment, as opposed to payments scheduled in the future, often required to secure a purchase or service.