If the Marginal Propensity to Consume Is 0

question 101

Multiple Choice

If the marginal propensity to consume is 0.8 and the government reduces taxes by $5 billion, equilibrium income will

• A) fall by $20 billion.
• B) rise by $20 billion.
• C) fall by $25 billion.
• D) rise by $25 billion.

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Definitions:

Bid-Asked Spread

The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask) for an asset.

Broker's Commissions

Fees or payments made to a broker for executing a transaction or providing specialized services.

Price Concession

A reduction in the price of a good or service, often to facilitate a sale or agreement.

Limit-Sell Order

An order to sell a security at a specified price or better.