If the Marginal Propensity to Consume Is 0

question 196

Multiple Choice

If the marginal propensity to consume is 0.6 and investment spending declines by $50 billion,by how much will equilibrium output change?

• A) -$125 billion
• B) -$83.3 billion
• C) -$50 billion
• D) $83.3 billion
• E) $125 billion

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Definitions:

Labor Supplied

The total hours that workers are willing and able to work at a given wage rate in a certain period of time.

Job Experience

Refers to the skills and knowledge a person gains while working in a specific job or occupation over a period of time.

Average Wages

A measure of the average income earned by workers, calculated by dividing the total wage bill by the number of employees.

Compensating Differentials

Differences in wages that arise to offset the non-monetary characteristics of different jobs, such as risk or undesirable location.