Refer to the Given Table, Which Illustrates the Multiplier Process

question 77

Multiple Choice

$$\begin{array} { | l | c | c | c | } \hline & \text { Change in Income } & \begin{array} { c } \text { Change in } \\\text { Consumption }\end{array} & \text { Change in Saving } \\\hline \text { Assumed Increase in Investment } & \$ 20 & \$ & \$ 4.00 \\\hline \text { Second Round } & \$ & \$ 12.80 & \$ \\\hline \text { All Other Rounds } & \$ & \$ 51.20 & \$ \\\hline \text { Totals } & \$ & \$ & \$ 20.00 \\\hline\end{array}$$ Refer to the given table, which illustrates the multiplier process. The marginal propensity to save is

• A) 0.5.
• B) 0.25.
• C) 0.2.
• D) 0.1.

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Definitions:

State Income Tax

A tax imposed by individual states on the income of residents and sometimes non-residents who earn income within the state.

FICA

Federal Insurance Contributions Act; a U.S. law that requires a payroll tax on both employees and employers to fund Social Security and Medicare.

Unemployment Taxes

Taxes imposed on employers by the government to fund unemployment insurance programs.

Taxable Wage Base

The maximum amount of an employee's earnings that are subject to certain taxes, such as Social Security tax, within a given tax year.