If the Marginal Propensity to Save Is 0

question 76

Multiple Choice

If the marginal propensity to save is 0.40, a $20 billion increase in investment spending would cause equilibrium output to:

• A)increase by $50.
• B)increase by $80.
• C)decrease by $33.
• D)decrease by $40.
• E)decrease by $20.

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Definitions:

Security Interest

A security interest is a legal claim or right granted by a borrower to a lender as collateral for a loan, securing payment or performance of an obligation.

Perfection

Perfection is a legal process that establishes a secured creditor's interest in a debtor's collateral, making it legally enforceable against third parties.

Collateral

Property or assets that are pledged as security for the repayment of a loan, subject to seizure on default.

Consensual Secured Transaction

A financial agreement where both parties agree to the deal, and collateral is provided to secure the transaction.