If the Marginal Propensity to Consume Is 0

question 121

Multiple Choice

If the marginal propensity to consume is 0.75 and government spending decreases by $2,000 billion,what is the change in GDP?

• A) -$2,000 billion
• B) -$8,000 billion
• C) $2,000 billion
• D) $1,500 billion
• E) $8,000 billion

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Definitions:

Price Elasticity

measures how sensitive the quantity demanded or supplied of a good is to a change in its price, indicating the responsiveness of market participants to price changes.

Price Elasticity

A measure of the responsiveness of the quantity demanded of a good to a change in its price.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a specific price point.

Equilibrium Price

The cost level where the amount of a product or service that consumers want to buy equals what is available, resulting in a balanced market situation.