If the Marginal Propensity to Consume (MPC) Is 0

question 53

Multiple Choice

If the marginal propensity to consume (MPC) is 0.75, and if the goal is to increase real GDP by $400 million, then by how much would government spending have to change to generate this increase in real GDP?

• A) $140 million.
• B) $100 million.
• C) $200 million.
• D) $400 million.

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Definitions:

Less Valuable

Considered to have lower worth or importance in comparison to something else.

George Homans

An American sociologist known for his work in developing social exchange theory, which posits that the exchange of goods, services, and social values plays a key role in the formation of social relationships.

Success-Stimulus

The principle that success in a certain activity or field encourages continued action and effort in that or similar activities.

Preferences

Individual choices or inclinations towards certain options, actions, or outcomes, often studied in psychology and economics.