Assume the MPC Is 0

question 39

Multiple Choice

Assume the MPC is 0.8. If government were to impose $50 billion of new taxes on household income, consumption spending would initially decrease by

• A) $100 billion.
• B) $90 billion.
• C) $40 billion.
• D) $50 billion.

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Definitions:

Exempt

Freed or relieved from a duty, requirement, or liability to which others are subject.

Security Interest

A legal claim or encumbrance on property or assets, securing the payment of a debt or performance of some other obligation.

Collateral

Assets pledged by a borrower to secure a loan or credit, which can be seized by the lender if the borrower fails to repay.

Perfected Interest

A legal claim or lien that has been formally established to secure priority over other claims concerning the same asset or property.