If the Marginal Propensity to Consume (MPC) Is 0

question 156

Multiple Choice

If the marginal propensity to consume (MPC) is 0.75, and if policy makers wish to increase real GDP by $300 million, then by how much would they have to change taxes?

• A) − $300 million.
• B) − $200 million.
• C) − 100 million.
• D) − $50 million.

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Definitions:

Marginal Utility

The additional satisfaction or utility a consumer receives from consuming one additional unit of a good or service.

Rutabagas

A root vegetable with a taste that is a mixture of cabbage and turnip, commonly used in cooking.

Broccoli

A green vegetable with a large flowering head, stalk, and small associated leaves, often eaten for its nutritional qualities.

Marginal Utility per Dollar

The additional satisfaction or utility gained from consuming one more unit of a good or service, divided by its cost.