If the Consumption Function Is C = 25

question 91

Multiple Choice

If the consumption function is C = 25 + (.80 × disposable income) , what is the marginal propensity to consume?

• A) .80
• B) .20
• C) .25
• D) It is impossible to tell without knowing either the level of consumption or the level of disposable income.

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Definitions:

Merchandise Inventory

The goods available for sale to customers in retail or wholesale businesses, valued at lower of cost or market value on the balance sheet.

Credit Sales

Transactions where goods or services are provided to a customer with an agreement to pay at a later date.

Operating Expenses

Expenses related to the normal operations of a business, excluding the cost of goods sold.